Black Range Rover or Gold?

Today is a bank holiday and unfortunately you may be sitting in a traffic jam. Take a look at the cars around you and estimate what they might be worth, or at least what they might have cost new. It will probably be a big number!

A friend of mine sold his Range Rover recently. He estimated that it had cost him about £1000 per month in depreciation since the day he bought it. For most people, that is a serious amount of money. Yet buying expensive cars is evidently quite popular when I look at what is on the roads alongside me. Why is this so?

Well, it seems that last year, because savings interest rate is so low, consumers in the UK borrowed a record £31.6 billion to finance the purchase of cars. Will that money increase in value? I don’t think so! Most of this £31.6 billion will vanish in depreciation. Many car buyers would have been way better to have invested their money in an asset that is appreciating, rather than buying a depreciating vehicle. Which assets will increase in value? Property? Shares? Gold? Bonds? Commodities? I don’t know, but I do know that Range Rovers are not an asset class. Quite the opposite, in fact.

Not knowing is fine. Of course, no-one knows what the future holds, although many financial writers and journals try to give the impression that they do. This is why I like to look at all of the above asset classes and decide whether I want to be invested in them, or whether I want to keep my money in cash. If the asset class is rising in price I like to own it. I will continue to own the asset class until I get a signal to exit that asset class. If it falls in price then I don’t want to own it any more, and I sell it. This is trend-following, and it is a simple concept, but sometimes quite difficult to implement.  

Have a look at this video and see how the various asset classes are doing, and find out what I am currently invested in:[embedyt] https://www.youtube.com/watch?v=VGFsXgnjKw4[/embedyt]

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