If you’ve been following the financial headlines recently, you will have noticed the excitement around gold and silver. Over the past two years both metals have enjoyed an impressive run, reaching record highs and producing eye-catching gains. Naturally, this raises a question that many investors quietly ask themselves: Should we have owned more of it?
It’s a fair question. Watching an asset class surge while you’re not heavily invested in it can be uncomfortable. Gold in particular has a powerful story behind it. It feels tangible. Real. It has been seen as a store of value for thousands of years and historically even formed the backbone of global currencies. In uncertain times the narrative is simple: own something you can hold.
But before making changes to a long-term portfolio, it’s worth stepping back and thinking carefully about what would actually have been required to capture those gains.
The Hindsight Trap (looking in the rear view mirror)
One of the most powerful psychological forces in investing is hindsight bias. Once something has happened, our brains convince us that it was obvious all along. But markets don’t work that way. To have meaningfully benefited from the recent rally in gold and silver, you would have needed to make a large and concentrated bet before the rally began. At the start of 2024 that case was far from obvious. Gold had been moving sideways for years. Interest rates were high. Silver had been stuck in a trading range for a long time.
Another bias then reinforces the illusion: survivorship bias. We constantly hear about the investments that worked out. The big winning bets make the headlines. The countless bets that failed rarely do. Looking backwards, winners appear inevitable. In real time, they never are.
The Difference Between Assets and Businesses
There is also an important difference between owning commodities and owning businesses.Gold and silver certainly have practical uses in the real world. They appear in jewellery, electronics, and many industrial applications. But as financial assets they produce no income. No earnings. No dividends. They simply sit there. In fact, they cost money to store and insure.
Shares, on the other hand, represent ownership in businesses. Real companies that employ people, serve customers, solve problems, and generate profits. Over the coming decades we cannot predict exactly what challenges the world will face. But we can be fairly confident about one thing: human ingenuity will continue to adapt. Businesses will keep innovating, finding new ways to create value.
The long-term case for owning productive companies remains far stronger than trying to guess which asset might shine next.
Diversification Means You Didn’t Miss Out
There is another important point that often gets overlooked. If you own a diversified global portfolio, you didn’t completely miss the gold rally anyway. Many global equity funds include mining companies and businesses connected to the commodities sector. You may have captured some of those gains already—just not through a concentrated bet.
And that’s precisely how diversification is meant to work. As Nick Murray once said, diversification means you will never own enough of any one investment to make a killing in it—but you will also never own enough to get killed by it. It’s a trade-off that protects long-term financial independence.
Process Over Outcomes
In the end, successful financial planning is not about identifying the next asset class that will make headlines. It’s about building a plan robust enough to support your life across many different outcomes. Our role as financial planners is not to chase whatever is performing best this year. It is to help protect your financial fortress so that you and your family can remain financially independent for the rest of your lives.
Markets will always rotate. Today it might be gold. Tomorrow it could be something entirely different. The headlines will change. The hype will move on, but the principles that build lasting wealth remain the same: stay diversified, stay disciplined, and focus on the long term rather than the latest trend.
Dirk Groeneveld, Certified Financial Planner
t. 083 261 9287
Recent columns:
- Let’s talk about your budget
- Enjoy yourself, it’s later than you think!
- Financial Planning, What It Really Is
- Planning Retirement Properly: Turning Wealth Into a Life Well Lived
—
Disclaimer:
This article is for information purposes only and does not constitute financial advice in any way or form. It is important to consult a financial planner to receive financial advice before acting on any information contained herein. Client Care and PWM and its directors, officers, and employees shall not be responsible and disclaim all liability for any loss, damage (whether direct, indirect, special or consequential) and/or expense of any nature whatsoever, which may be suffered as a result of, or which may be attributable, directly or indirectly, to the use of, or reliance upon any information contained in this article.
Recent Comments