Three years ago, a discussion began on this site about which investments might do the best job of growing faster than the rate of inflation. It’s a pretty important question for anyone who hopes to attain a reasonable degree of financial security. Bank accounts, government bonds, and GICs all pay well below the rate of inflation, meaning that those who are prudent enough to set money aside actually pay a penalty for doing so.
Based on the way in which equities have consistently outpaced commodities and bonds over the last few decades, my guess was that a low-fee index-tracking mutual fund was probably the best bet for ordinary investors hoping to achieve growth at a reasonable level of risk.
I bought some units of the ING Direct Streetwise Balanced Growth Fund for $8.18 each on 20 May 2009. The unit price has since risen to $9.61 – an increase of 17.5% over three years, after fees. That almost certainly beats the pace of inflation, but I am not sure how it compares to alternative investments that could have been made at the same time. Given how much the price of gold has shot up lately, I suspect it would have been a better investment for the 2009-2012 span. That said, given that gold doesn’t actually produce any return, I suspect the index tracker will dramatically outperform it over a multi-decadal timescale. Time shall tell.
P.S. I really wish there was a low-fee index tracking option that didn’t include investments in the oil, gas, and coal industries. It is particularly troubling that every major Canadian financial institution seems to invest in oil sands development.