Should I Buy Gold?
Investors often ask me, "Should I order gold?" The answer is simple, i think: Gold should be a part of every investor's portfolio. Whether you believe gold is going to appreciate short-term or not is a matter for speculators, but smart investors who desire a diversified portfolio may wish to own gold for its protective qualities. Gold is an excellent diversifier, and it offers protection against many adverse events available on the market, as we will discuss below.
Why must I Buy Gold?
Gold adds another layer with a portfolio filled with stocks and bonds. Gold is a completely different asset class than stocks are. Perhaps the ETF that trades like a stock behaves like gold because it is tied to the price of bullion. In comparison to the stock market, gold has behaved in a roughly inverse fashion to the stock market since 1971 when the gold standard was abandoned. For traditional buy and hold investors, gold provides returns when the stock market underperforms.
Gold Offers Protection worthwhile
Gold protects against inflation. Inflation takes place when the money supply is increased, causing each unit of currency to become worth less. Then this happens, prices for products or services will rise. This will cause the buying price of gold to rise as well, since it will take more of the dollars (that are each worth less as a result of inflation) to buy an ounce of gold. The stronger the inflation, the faster gold will rise. Many investors keep some gold within their portfolio for just this reason.
Gold Investors are ready for Disasters
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Since the economy of each nation (and the worldwide economy) is based on trust, it can collapse when that trust is eroded. Consider this: the paper that money is printed on isn't worth anything. It is worth value as a result of trust that people have within the government and the economic system. The moment a nation defaults on its debt, the amount of money becomes worthless-it is literally not well worth the paper on which it is printed. Gold, however, will always be worth something. In this way, it really is currency. So, some people like to have gold around as a protection against a bank failure, a war, riots, or severe political climate changes or another disaster that might cause a currency decline or failure. Indeed, history demonstrates when a nation is facing war, economic or political uncertainty, or perhaps a financial crisis, the demand for gold rises sharply.
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Know Your Investment Strategy
You have to decide which kind of investor you are, so that you can figure out how to work gold into your portfolio. For example, if you are risk averse, and also you do not want to store gold in your own home, then you may want to get a gold account, gold certificate, or buy shares from the gold ETF. If you feel gold will appreciate in the long run, and you want to reap higher rewards, you can invest in mining stocks as well as the gold miners ETF, both of which are leveraged, meaning they multiply advances and declines inside the gold price. For a buy and hold investor with average risk tolerance, 25-30% of your portfolio invested in gold is reasonable. A more speculative investor may want to hold a higher percentage in gold, and make use of more leveraged instruments like gold stocks and futures. There's no right or wrong amount of gold to carry. There is only the amount that's right for you.
Knowing Where to Buy Gold
Owning gold hasn't been easier than it is today. Once you know your strategy, then you can start to pick out which investment vehicles obtain the most sense to you. There are many ways to own it, several of which can be done with clicks of a mouse. You are able to, of course, opt for gold bullion or gold coin ownership. If you want to own it but have somebody else take possession of it, then gold accounts and/or gold certificates are for you. If you want to trade it like a stock, then the gold ETF has to be your choice. For those who want a a bit more risk with the potential for higher rewards, there are gold mining stocks, the gold miner's ETF and leveraged ETF funds.
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