By Martin Krikorian
"I feel so much more secure knowing that my money is protected, and that's why I buy gold every chance I get." -- William Devane, spokesman for Rosalind Capital
"Gold is a proven solid, steady, and secure investment." -- Scott Carter CEO, Lear Capital
We've all seen the television commercials touting gold. These commercials show how gold has significantly outperformed stocks since 2000. From Dec. 31, 2000 to Dec. 31, 2012, gold earned an annualized compound return of 15.7 percent, vs. 6.1 percent for stocks and 2.9 percent for bonds.
What these commercials fail to mention is how gold performed over the long term. Most every commercial comparing the returns of gold vs. stocks chooses or "cherry picks" the investment period starting in 2000.
Choosing or "cherry picking" an investment period that only shows or compares investment returns during periods of above-average performance can be misleading to investors. The Securities Exchange Commission's Office of Investor Education and Advocacy released the following statement on Wednesday: "If you are in the market for an investment, you will likely come across sales and marketing materials that describe an investment's performance. You should know that performance information can be presented in many different ways." ... "Performance should not be presented for only periods of good returns and exclude periods of bad returns (a practice known as 'cherry-picking').
You should question any performance presentation that does not cover reasonable time periods across variable market conditions, including both up and down markets."