Thursday, March 01, 2012

Why Warrenn Buffett doesn't like gold as a long-term value investment

As I've written about before, I have a small part of our investments in a Silver ETF which I don't like. It basically just sits there. Doesn't pay dividends, doesn't pay interest. Just follows the price of physical silver. It isn't in a tax-sheltered account so I just continue to let it sit there since I don't want to sell and deal with tax gains on it. At least not yet. But I keep thinking that in the long run it'd be much better in a REIT ETF or something similar.

I recently read a column by Warren Buffett that explains why he isn't a big gold investor. He makes an excellent analogy that addresses the exact problem I have with my Silver ETF investment.

He compares a pile of all the gold in the world worth about 9.5 trillion dollars to a pile of tangible investments worth an equal amount of value. And why it is a no-brainer in regards to which one holds a better long-term value. Maybe with this in mind I should just bite the bullet and sell my Silver ETF and put it in something else.

Here's a 5 minute video that explains Buffett's view:

1 comment:

Financial Independence said...

I have invested small sum in the precisious metals myself. While same as you I am not a big fun, nor believe it is contributes towards my financial independence.

But than most of us do not have Buffet's brain. Most of the stocks pays 2% dividends (Exxon Mobil). What a coincidence! S&P 500 ended the year of 2011 within 0.01% of where it was at the beginning of the year. So stocks are not compensate adequately for the risk involved. Naturally people invest in secure instruments - gold and silver.