At the very mention of gold, images of value, stability,
and growth pop into my head.
It's not hard to understand why. For decades, the precious
metal has been marketed as an attractive investment and a
great way to hedge inflation, recession, and almost
every other economic bogeyman.
In spite of its allure in volatile times such as these,
the true long-term performance of gold lags stocks by a
significant margin. But investors don't need to give up the
shiny lure of stability to earn better returns in stocks.
Some stocks out there are as good as gold -- and many are
even
better.
Chasing shiny trinkets
As a new investor, I was drawn to growth. This led
me to buy -- or seriously consider buying -- shares in tech
darlings such as
EMC (NYSE: EMC),
SanDisk (Nasdaq: SNDK), and
Brocade Communications (Nasdaq: BRCD) in the
late 1990s. But while these stocks were shinier than gold for
a while, the luster wore off after the bubble burst in 2000.
Each stock shed more than 80% of its value in the
ensuing years.
These companies weren't poor businesses. But the
fundamental conditions just didn't support their
stratospheric share prices at the time. I would have been far
better off had I understood what
demented guruJeremy Siegel pointed out in his book,
The Future for Investors: Regular investments in
stable, dividend-paying stocks are ultimately the best place
for long-term cash.
You can have it all
Dividend payments to shareholders are
a significant stabilizing factor in a stock's
return. They help smooth out the ups and downs of the market
over time, and they indicate that the company is
generating cash. Just like gold, steady dividends protect
investors from bear markets. But even
betterthan gold, dividends also
help boost returns.
For instance, look at the long-haul performance
of these dividend-paying stocks:
Company
20-Year Performance
Procter & Gamble (NYSE: PG)
961%
Johnson & Johnson
1,264 %
Altria (NYSE: MO)
1,394%
Home Depot (NYSE: HD)
1,849%
AT&T (NYSE: T)
326%
S&P 500 Continued... |