Should I Buy Gold?

Investors often ask me, "Should I buy gold?" The answer is simple, for me: Gold should be a part of every investor's portfolio. If you believe gold is going to appreciate short-term or not is a matter for speculators, but smart investors who want a diversified portfolio will want to own gold for its protective qualities. Gold is an excellent diversifier, and it offers protection against many adverse events in the marketplace, as we will discuss below.

gold spot

Why Should I Buy Gold?

Gold adds another layer to a portfolio filled with stocks and bonds. Gold is really a completely different asset class than stocks are. Even the ETF that trades like a stock behaves like gold because it's tied to the price of bullion. As compared to the stock market, gold has behaved inside a roughly inverse fashion to the stock market since 1971 when the gold standard was abandoned. For traditional buy and hold investors, gold can offer returns when the stock market underperforms.

Gold Offers Protection of Value

Gold protects against inflation. Inflation occurs 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 (which are each worth less as a result of inflation) to buy an ounce of spot gold

Gold Investors have decided for Disasters

Since the economy of each and every nation (and the worldwide economy) is founded on trust, it can collapse when that trust is eroded. Consider this: the paper that money is printed on just isn't worth anything. It is worth value because of the trust that people have in the government and the economic system. When a nation defaults on its debt, the cash becomes worthless-it is literally not well worth the paper on which it is printed. Gold, however, will almost always be worth something. In this way, it really is currency. So, some people enjoy gold around as a protection against a bank failure, a war, riots, or severe political climate changes or any other disaster that might cause a currency decline or failure. Indeed, history implies that when a nation is facing war, economic or political uncertainty, or a financial crisis, the demand for gold rises sharply.

Know Neglect the Strategy

You have to decide what type of investor you are, so that you can figure out how to work gold into your portfolio. As an example, if you are risk averse, and also you do not want to store gold in your house, 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 and also the gold miners ETF, both of which are leveraged, meaning they multiply advances and declines within the gold price. For a buy and hold investor with average risk tolerance, 25-30% of a portfolio invested in gold is affordable. A more speculative investor may want to hold a higher percentage in gold, and employ more leveraged instruments like gold stocks and futures. There's no right or wrong amount of gold to carry. There is only the amount which is right for you.

Knowing Where to Buy Gold

Owning gold has never been easier than it is today. Once you know your strategy, then you can begin to pick out which investment vehicles obtain the most sense to you. There are many methods to own it, several of which can be done with clicks of a mouse. It is possible to, of course, opt for gold bullion or money ownership. If you want to own it but have someone else take possession of it, then gold accounts and/or gold certificates are for you personally. If you want to trade it being a stock, then the gold ETF has to be your choice. For those who want a little more risk with the potential for higher rewards, you will find gold mining stocks, the gold miner's ETF and leveraged ETF funds.

gold spot


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