With the buying power of dollars set aside for college shrinking and investment yields falling, a shortfall is likely to occur when it comes time to pay tuition, says Capital Gold Group.
College funds converted into physical gold can help keep pace with inflation and the rising cost of tuition, explains the provider of gold bullion and precious-metals IRAs.
“Parents with the foresight to move their children's college funds into gold a mere five years ago have seen the value of their holdings double in stark contrast to other traditional investments,” the company said in a press release Monday.
The last decade could more accurately be called "the lost decade" when it comes to traditional investments, the group adds.
A $1,000 investment in gold 10 years ago would be worth more than $4,000 today, while $1,000 invested in the stock market at the beginning of the decade would have had approximately the same value at the end, it said in a statement.
Metals vs. Markets
The USAA Precious Metals & Minerals Fund (USAGX), for instance, has average returns of 29.32%, 32.64% and 15.19% for the past 5, 10 and 15 years, respectively, according to Morningstar. US Global Investors Gold and Precious Metals’ (USERX) returns for the same periods are 23.65%, 27.56% and 2.13%.
In contrast, American Funds Growth Fund of American (AGTHX) had average returns of 2.53% for five years, 2.05% for 10 years and 9.28% for 15 years. The Dodge & Cox Stock Fund (DODGX) posted average returns of -0.50%, 5.70% and 9.46% returns for the same periods.
Thus, over a 10-year period the metals funds outperformed stock funds by a large margin. But that result was not as conclusive for the 15-year period.
With the U.S. dollar plummeting 13% since June, and the recent announcement that the Federal Reserve will be embarking on a second round of quantitative easing to buy $600 billion in Treasuries in an effort to pump up the economy by increasing liquidity, some experts are predicting a further devaluation of the U.S. dollar.
This could create inflation and signal an end to the 30-year bull market in bonds.
Such trends, the Capital Gold Group says, are further arguments for investing in the precious metal.
Worth the Cost
According to studies conducted by The College Board, employees with a four-year college degree earn much more and are less likely to be unemployed that those with just a high school diploma.
Plus, the 2009 unemployment rate for college grads over age 25 is 4.6% compared to 9.7% for high school grads.
In addition, women college grads today earn 79% more and men 74% more than their high school grad equivalents.
"Students are finding it necessary to take out additional loans to pay for tuition and other college expenses and are graduating with huge student loans that will take decades to repay," said Capital Gold Group CEO, Jonathan Rose in Monday’s press release.
"With the legacy of debt and deficit spending our country is leaving for future generations, our young children today need every financial advantage we can give them," he explained.