Investing in Hard Asset Stocks Vs. Investing in Commodities

Is investing in hard-assets stock the same as investing in commodities?
David Marotta: You need to keep in mind that investing in hard-asset stocks is not the same thing as investing in commodities. Commodities are things like gold, silver, oil; it even includes things like soybean, contracts and things like that. But investing in a commodity like gold will generally hold its value but it won’t appreciate the value. When you invest in a gold mining company, they actually have profits, returns, they are expanding their business. Studies have shown that investing in stocks appreciates at about 6.5% over inflation. Investing in commodities ends up appreciating just with inflation. So, over the last 200 years, stocks have been appreciating about 6.5% of inflation. But a dollars worth of gold 200 years ago, after in just adjusting for inflation is worth about $1.7 today. Now, a dollar 200 years ago is worth about $0.7 today because of inflation. So, a dollar isn’t worth as much but dollars worth of gold back then is equivalent to a dollars worth of gold today. So, gold and commodities hold their value but hard-asset stocks actually appreciate value.


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