In recent years, the investment community has increasingly looked to the principle of sector rotation as a way of understanding why some investments are better than others. In fact, the concept itself hedges the question; because it suggests that one kind of investment is better than another only during a specified period of time.

According to the Real Estate Research Corporation in Chicago, for instance, had you invested in real estate from 1987 through the third quarter of 2000, you would have yielded anywhere from 11% to 12.4%. On the other hand, had you bet on the stock market in 2012, using the Dow Jones Industrial Average (DJIA) as your gauge, you would have experienced a 10.24% return, including an average yield on dividends of 2.74%. And, God bless you had you managed to invest in the S&P during that same year! You would have wound up with a 13% return. Don’t feel bad if you missed that one. So did most hedge funds. According to a report from Goldman Sachs, only 8% of them beat the S&P.

Because gold is mined and not manufactured, it will continue to hold universal value over the long term.

Isn’t hindsight a wonderful thing? Just imagine what you could have achieved! And don’t kid yourself that ignoring entire stock market trends and paying attention to individual stocks would have necessarily made you a mint. Could you have predicted that the stock that gave the Dow its biggest steroid in 2012 would have been Home Depot, or the one that dragged it down the most would have been McDonald’s? Could you have guessed that Netflix would come back with a vengeance after alienating its customer base by splitting it into disc-only customers versus streaming customers?

These are perfect reasons for you to always own some gold. It’s the all-seasons component of the shrewd investor’s portfolio. As the World Gold Council succinctly puts it in its guide to investing in gold, there are four reasons for this:

  • Gold is a long-term store of value.
  • It is an asset of last resort.
  • It is highly liquid.
  • It is an asset diversifier.

With respect to the first reason, it’s clear that since gold is mined but not manufactured, it will continue to hold universal value over the long term. The stock market can go up and down, and the bottom of the real estate market can fall out, but physical gold will always hold its own throughout the world. Anyone who doubts that gold is highly liquid should consider that, when paper currency loses its value, gold will continue to maintain value. It is portable, and instantly recognizable as a means of payment.

Given these first three qualities, how can you not possibly feel confident that gold serves as an asset diversifier? Follow it’s price, of course. Be careful in your purchases, by all means. But, when all is said and done, don’t fail to include gold — physical gold — in your portfolio.