Grow Your Dough Update: Investing in Gold Continues to Kill Me

The only thing I can hold on to at this point is the fact that my partner in crime, Joe Saul-Sehy, is doing worse than I am in Motif’s Grow Your Dough challenge. Investing in gold is killing me right now.

Anyone who knows me is aware that investing in gold is not really my thing. But for this year’s Grow Your Dough challenge, sponsored by Motif Investing, I decided to tweak the so-called “permanent portfolio.”?My main tweak involves using a REIT instead of cash. But because the permanent portfolio also involves in gold, I’m doing rather poorly: I’m sitting at #17 out of 21 participants. At least last year my super-boring dividend experiment put me closer to the top 10.

The only thing that keeps me going is the fact that Joe Saul-Sehy, one of my fellow panelists at the Money Tree Investing Podcast is doing worse than I am. Poor guy invested in emerging markets and oil and his negative returns make my negative returns look — well, not so bad.

Grow Your Dough Miranda v Joe

There’s a reason that I’m not fond of investing in gold, or, rather, being exposed to gold, because ETF investing isn’t really investing directly in the underlying assets.?No matter how many gold bugs try to change my mind, I just don’t see it. The problem with gold is that, just like any other asset, it’s subject to market sentiment and perception.

We’d like to think that there’s intrinsic value to gold (and to silver and other precious metals), but the reality is that it’s just like anything else in this world. It only has the value we give it. And I’ve said it several times:

Even if the entire economy goes to pot, gold isn’t going to be that important. No one will afford your bullion. Instead, you’ll need survival skills, food storage and probably a decent gun. I’ve more faith in my fishing tackle and my hunting skills than I have for investing in gold.

And as I watch my (somewhat modest, to be sure) losses as the year progresses, I realize that the only thing helping at all is the high-yield ETF in my Grow Your Dough portfolio.

investing in gold is kiliing me

It’s true that my REIT isn’t doing as well, and neither is the high-yield bond ETF, but neither of these asset classes are down as much as gold. I do hope that maybe we’ll see some improvement in the near future, for the sake of my challenge portfolio, but we’ll see.

Dividend Stocks Offer Some Relief

When it comes to the last month, I’ve seen some help with my portfolio. But it’s all coming from high-yield dividend stocks. One of the things I learned last year is that I want to do more with dividend investing. I was reasonably pleased with my results from last year’s challenge, in which I got my feet wet with dividend investing. I like the idea of earning dividends and, for now, reinvesting them to boost my portfolio.

While I’ll probably always fall back on the principles of MPT for my long-term retirement investing and utilize Betterment for that effort, it is kind of fun to experiment a little bit. And it always helps when it’s not your own money. I did a little more that I wouldn’t have done with this year’s challenge portfolio because Motif Investing was generous enough to provide us with the funds. It would be nice to be like PT, and see an amazing return (speculation is totally paying off for him, but it’s too scary for my boring investing style), the reality is that I just want to come out ahead of myself.

And that’s what always brings me back to indexing. There’s a reason that my long-term portfolio is focused almost entirely on index ETFs:

This is why I love indexing

The S&P 500 continues to kick my butt, and, really, in the long run all you need to do is keep pace with the market to come out a “winner” in the wealth game.

After this challenge is over, there is a good chance that I’ll give up on investing in gold altogether and instead renew my focus on the boring things that do me the most good over a long period of time: indexing and dividends (or combining the two strategies).

What do you think? And what should I have done differently with my portfolio to at least get in the black?
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