Don't get your gold investment advice from this guy

This story is from almost a week ago in MarketWatch, but better late than never. It is yet another indication that the mainstream financial world is catching on to gold as an investment, but they're still pretty far behind.

MARSHALL LOEB'S DAILY MONEY TIP
Chasing the glitter of gold
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You may be tempted to jump on the bandwagon, but bear in mind that the gold metal pays no dividends or interest, is costly to store and to ship, and can swing down as well as up. Indeed, prices of mining-company stocks tend to be more volatile than the metal itself.

Still, for the sake of diversification, the ordinary investor may be wise to park some assets -- perhaps 5% -- in the 30 to 40 gold mining companies that unearth the metal and sell shares to the public through ordinary securities salesmen. You also can buy shares in diversified mutual funds that hold some of the metal or in exchange traded funds.
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In sum, gold can be a worthwhile long-term investment, if you use it as part of a well diversified portfolio -- and you have a cast-iron stomach.

Yeah, well diversified along with silver, oil, natural gas, base metals, and agricultural products - that would be a well diversified portfolio.

While gold is clearly more volatile than many other investments, there has been a surprising narrowing of the gap between major equity indexes and natural resource investments. Since last summer, an investment portfolio that covers all types of commodities and related shares has been only slightly more volatile than the S&P500 and, more importantly, prices have been moving in a much better direction. Foreign stocks, particularly from emerging economies, can be even more volatile than gold and other commodities.

As for the "no dividends or interest" rap, does this really matter anymore?

If I had many, many millions of dollars and I wanted a safe and sane five percent a year for the rest of my life so I could just go out and have a good time, then it certainly would matter and quite a bit.

But, since the mid-1990s, we live in a world where ordinary individual investors have come to expect capital appreciation in stocks to make the lion's share of the gains over their investing lifetime.

[The individual investor remains blissfully unaware that the lion's share of gains in equity markets for the prior hundred years were from dividends and not capital appreciation.]

When you think about it, it's a rather small leap to go from appreciation in equities to appreciation in the world's oldest form of money, given the precarious state of the world's current system of money and credit.

Don't get your gold investment advice from this guy.