ANSWER by Mary Holm (finance journalist):



You acknowledge that you’ve been lucky with the period you chose, in that gold rallied recently and the Kiwi dollar has fallen. But there’s more to it than that.



The particular pattern of prices suits you well. You’re drip feeding money in and buying gold cheaply early in the period, and then valuing it at a high price at the end. If, instead, you had invested the whole lot in early 2013, you would be losing now, as our graph shows. And what if you had put the lot in at the 2011 peak?



And you underplay the big drop in the exchange rate between the New Zealand and US dollars over the period — from about 80 to 60 cents. That greatly affected your results. In any future period, the opposite could occur.



Also:



+ You ignore dividends, which is like ignoring rent when you look at a property investment. And it makes a particularly big difference when we’re looking at NZ shares, which tend to pay higher dividends than in other countries.



+ You ignore tax, which favours NZ shares over gold. A tax expert tells me that after taking dividends and tax into account, we should add $35,000 to the shares and subtract $30,000 from the gold.



+ You ignore fees. These can be low for shares if you use an ETF (exchange traded fund) or index fund. For gold, either you have to pay for storage or you invest in a gold ETF and the manager has to pay for storage — a fee that is typically 1 per cent.



By the time we adjust for all that, NZ shares beat gold over the period. And that’s over a particularly strong period for gold!



Another problem with gold is that you don’t receive any ongoing income — like interest, dividends or rent. You have to come up with other money to pay your tax.



Gold is particularly favoured by some people in unsettling times. They make comments like yours, that it will always have value — whatever happens to a government or an economy.



What if you put just your suggested 10 or 20 per cent of your investments in gold? That does give you some diversification, but it’s not going to make that much difference if the rest of your savings either plummet or soar.



QUESTION TO YOU: Do you invest in gold - and why?