Are you investing in gold? Then can we suggest reading how the gold markets work?
It will save you money by helping you avoid a purchase of gold costing 10% more than it should.
You needn’t make that mistake.
We can show you clearly how to buy the most trusted form of gold in the world, at the best prices, and in the safest, easiest way.
If you’re still thinking about Gold Investment, and rationalizing what can be a difficult decision we recommend before you invest in gold.
Review of the Gold Investment Market
Gold investment worldwide has grown dramatically in the last five years, but compared with the total stock of financial assets, gold is still just a tiny proportion.
Several factors are now stimulating gold investment by new pension fund money – as well as by private investors.
Gold Investment vs. the Falling Dollar
As the US Dollar has slumped gold investment has outstripped the gains in all major world currencies.
In the five years to 2008 buying Euros to defend against the Dollar’s decline has returned 47%. Gold investment, on the other hand, has returned 131%.
British, Australian, South African and Indian citizens undertaking gold investments in 2007 all enjoyed the gold price reaching record new all-time highs.
When Inflation Looms, Gold Investment Shines
The surge in crude oil prices has closely matched the gains in gold prices since 2003, but many people now thinking about gold investment will also want to consider the surge in world food prices, the boom in base metals such as copper, and the current all-time highs in the cost of shipping.
Rising demand for better housing and durable goods from Asian consumers is certainly a factor. But many gold investment analysts also point to the huge growth in credit and debt in the West.
The money supply in the United States has doubled in the last seven years. In Europe, growth in the money supply hit a near-30 year record in late 2007, increasing the appeal of gold investment as the value of each Euro in circulation threatens to shrink under the weight of new notes and electronic account balances.
Gold Investment: The Antidote to Complex Debt Defaults
“Financial innovation in the last few years has been extremely strong and powerful,” as Gilles Gilcenstein, head of asset management at BNP Paribas, put it in late 2006. We’ve now seen this bubble in complex and novel investments bite back.
The global credit crunch first bit when the alphabet soup of MBS, CDOs, CDS and ABCP turned sour as the US mortgage market turned down.
These instruments thrive in the opaque, off-balance-sheet environment of modern financial engineering.
But transparency is important. The modern world has audited accounts, and open exchanges, and ‘public’ companies for a good reason: because previous generations understood that when investment stops being open and transparent, and reverts to cosy secret deals, complex contracts, and big executive bonuses, then it is general investors who get cheated. Transparency helps stop these problems developing.
In stark contrast to the burgeoning complexity of modern securities markets gold investment remains uniquely simple, and – dealt the right way – uniquely transparent.
A solid gold investment sets you free from the risk of credit default or banking failures.
This popular investment vehicle tracks a market index and can help balance your portfolio.
Exchange-traded funds, or ETFs, provide broad market exposure and trade in a manner similar to stocks.
Passive mutual funds with low fees can provide great exposure to a whole collection of stocks all at once.
Just as borrowing money is a part of life for most people, companies and municipalities also borrow money by using bonds.
2. Decide how much you will invest in stocks
First, let’s talk about the money you shouldn’t invest in stocks. The stock market is no place for money that you might need within the next five years, at a minimum. While the stock market will almost certainly rise over the long run, there’s simply too much uncertainty in stock prices in the short term — in fact, statistically speaking, a drop of 20% in any given year isn’t unusual.
Here are some examples of money that would be much better off in a high-yield savings account than the stock market:
- Your emergency fund
- Money you’ll need to make your child’s next tuition payment
- Next year’s vacation fund
- Money you’re socking away for a down payment, even if you will not be prepared to buy a home for several years
Now let’s talk about what to do with your inestimable money — that is, the money you won’t likely need within the next five years. This is a concept known as asset allocation, and a few factors come into play here. Your age is a major consideration, and so are your particular risk tolerance and investment objectives.
Let’s start with your age. The general idea is that as you get older, stocks gradually become a less desirable place to keep your money. If you’re young, you have decades ahead of you to ride out any ups and downs in the market, but this isn’t the case if you’re retired and reliant on your investment income.
Here’s a quick rule of thumb that can help you establish a ballpark asset allocation. Take your age and subtract it from 110. This is the approximate percentage of your invest able money that should be in stocks (this includes mutual funds and Etas that are stock based). The remainder should be in fixed-income investments like bonds or high-yield CDs. You can then adjust this ratio up or down depending on your particular risk tolerance.
For example, let’s say that you are 40 years old. This rule suggests that 70% of your investable money should be in stocks, with the other 30% in fixed income. If you’re more of a risk taker or are planning to work past a typical retirement age, you may want to shift this ratio in favor of stocks. On the other hand, if you don’t like big fluctuations in your portfolio, you might want to modify it in the other direction.