Is gold a safety blanket or investment quilting essential?

The patchwork quilt of diversification looks awful smart. It's more than pretty with gold in it, too...

Investment experts keep telling us two things.

One, you must diversify your savings. Nothing works for ever. Two, your annual returns are set to be miserable, because there's no return to the out-sized gains of the 1980s and '90s. The last 10 years prove that.

Now, we don't doubt point one. Not even people buying gold in 2001 could in fact see the future (though we might tell you different tomorrow). That second claim needs a closer look, however.

U.S. Assets, U.S. Dollars: Total Annual Returns (before expenses & tax)

Source: BullionVault via CRB, LBMA, NAREIT, NYU Stern, St.Louis Fed

                REITS     = FTSE Real Estate Investment Trusts

                S&P        = S&P 500 equity index

                CCI         = CRB Continuous Commodity Index

                Corp       = Barclays Aggregate US Bond Index

                Trsy        = 10-year US Treasury bonds

                Cash      = 3-month Treasury bills

The idea is simple enough. Our patchwork quilt above looks a lot like the more famous Callan Periodic Table (well, famous to finance nerds and investing professionals). It compares the annual returns on a selection of assets. In the case of the Callan Table, those assets are mostly stock-market indices, split into emerging markets vs. Europe vs. a range of thinly sliced U.S. segments (Russell 2000 growth anybody?).

But while that's useful, perhaps, for equity-fund investing, there are lots of other things that both private savers and the professional investors supposed to be working for them also buy. What about commodities, real estate, gold, cash or T-bonds?

Now, as you can, and just like the people Callan say — as well as more finely-sliced examples, such as Frank Holmes at U.S. Funds ranking the different tradable commodities —  "The Table highlights the uncertainty inherent in all capital markets.

"Rankings change every year."

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