Golden regrets

My dumbest investment was investing in gold after I left the Navy. I did so through a company that charged me storage and handling fees that ended up offsetting my price gains.

— M.S., online

THE FOOL RESPONDS:

Many people like investing in gold, seeing it as a defensive move against possible economic downturns and a good way to diversify a portfolio.

Gold is generally far from a great investment, though. As finance professor Jeremy Siegel has shown in his book “Stocks for the Long Run” (McGraw-Hill, $40), between 1802 and 2012, a dollar invested in gold would have grown to $4.52 (adjusted for inflation). It would have grown to $281 in Treasury bills, $1,788 in bonds and $704,997 in stocks.

Over shorter periods, of course, gold can soar. About a decade ago it was around $600 per ounce, and it recently topped $1,200. But in 2011, an ounce went for more than $1,900. Gold can be more volatile than safe.

If you’re set on investing in gold, perhaps limit it to a small portion of your portfolio. You can invest in it in several ways — such as buying actual gold (which you’ll need to safely store), investing in gold-mining companies or opting for mutual funds focused on gold.

Remember that portfolios also can be diversified by holding domestic and foreign stocks, bonds and real estate investments. You can do well without gold.