Is gold a better investment than real estate?

Is gold a better investment than real estate?

A friend recently told me about a company with a cool concept. They catch phrase is, “turn worthless dollars into gold”.

 

“Worthless dollars” makes reference to the U.S. dollar no longer being backed by gold. The company allows its customers to buy gold one gram at a time for $60. This makes the concept of owning gold attainable for the masses. As I am writing this, gold is running just over $1,200 an ounce ($1,215.10). That is a chunk for most to come up with regularly to amass any amounts of gold.

 

When you think of gold, you may imagine the gold bars stolen in movies like The Italian Job. In reality, a one ounce gold coin is slightly larger than a quarter but smaller than a silver dollar. Needless to say, you could easily misplace $1,200 in your couch cushion. BE CAREFUL!

 

At $60 per gram, most people could start owning gold. Plus, this business gives you the opportunity to be an affiliate. You can share the benefits of owning gold with others and show them how to purchase it. In return, you get a cut of the profit. You also have the ability to sign up other affiliates under you and receive a cut of their sales.

 

This sounds like a good investment, right? You have a way to get residual income while using the medium of gold to hold your wealth.

 

Let’s take a quick side trip here. What does wealth mean to you? Is it big houses? Super nice cars? Vacations in Tahiti? I tend to take the Dave Ramsey and Robert Kiyosaki approach to wealth. To me, wealth is a measure of how long I can live comfortably if I no longer work.

 

For example, let’s say your household’s expenses are $4,000 per month. You have $16,000 in the bank. If you had no other income, then your wealth is four months long.

 

Now let’s say you have $5,000 in rental income each month. You can pay to live with $1,000 left over each month. You now have excess funds to invest or do what-ever the heck you want. Your wealth is infinite.

 

Back to gold: making this precious metal affordable to everyone is what makes this company attractive. But is it a good investment?

There are 31 grams in a troy ounce. If you buy a gram at $60, you will pay $1,860 an ounce. That’s one-and-a-half times the current price per ounce. That means your dollar just lost half its buying power when purchasing by the gram. In short, your dollar became worth less.

 

I don’t have gold yet, I’m estate building. I’m trying to become financially free by getting my passive income up above my monthly expenses. This means I need to find investment vehicles that pay regularly.

 

Gold doesn’t do that. It pays no dividends, no interest, or rents. It only pays when you liquidate it.

 

My friend told me he was thinking of buying a gram a week. That comes out to $3,120 a year. What if he took that money and put it into a Lonnie Deal? That’s where you buy a mobile home on a rented lot and sell it on an installment contract. Most of ours pay $300/month for three-and-a-half years. He would recoup his entire investment in 11 months while sporting a WHOPPING yield of 112.73 percent! Bam!

 

I still have a Lonnie Deal I bought three-and-a-half years ago that is paying $300/month. Three-and-a-half years ago, gold closed at $1,745.50. If you bought it then and sold today, your yield would be negative 10.30 percent. Ouch.

 

So, is gold a better investment than real estate? Hardly. Real estate wins hands down.

 

Joe and Ashley English invest in real estate in Northwest Georgia. For more info, or to ask a question, visit cashflowwithjoe.com.

 

 

2 comments

  1. I saw a video where Warren Buffett was speaking, and as I remember he said something to this effect, (this is not an exact quote) that if he owned all the Gold in the world, he would rather own a farm, one of the reasons being, because it was income producing year after year.

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