Should I Buy Gold?
Investors often ask me, "Should I buy gold?" The answer is simple, in my opinion: Gold should be a part of every investor's portfolio. If you believe gold is going to appreciate temporary or not is a matter for speculators, but smart investors who desire a diversified portfolio will want to own gold for its protective qualities. Gold is a fantastic 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 really a completely different asset class than stocks are. Even the ETF that trades just like a stock behaves like gold since it is tied to the price of bullion. In comparison to the stock market, gold has behaved in the roughly inverse fashion to the stock exchange since 1971 when the gold standard was abandoned. For traditional buy and hold investors, gold can provide 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 being worth less. Then this happens, prices for services and goods will rise. This will cause the price of gold to rise as well, because it will take more of the dollars (which can be each worth less due to 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 dependant on trust, it can collapse when that trust is eroded. Consider this: the paper that money is printed on is not worth anything. It is worth value due to the trust that people have inside the government and the economic system. When a nation defaults on its debt, the money 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 is currency. So, some people enjoy gold around as a protection against a bank failure, a war, riots, or severe political climate changes or other disaster that might cause a currency decline or failure. Indeed, history shows that when a nation is facing war, economic or political uncertainty, or even a financial crisis, the demand for gold rises sharply.
Know Neglect the Strategy
You have to decide what sort 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 with the gold ETF. If you feel gold will appreciate in the long run, and you want to reap higher rewards, you are able to 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 affordable. A more speculative investor might want to hold a higher percentage in gold, and employ more leveraged instruments like gold stocks and futures. There is no right or wrong amount of gold to carry. There is only the amount that is right for you.
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Knowing Where to Buy Gold
Owning gold has not been easier than it is today. When you know your strategy, then you can start to pick out which investment vehicles take advantage sense to you. There are many ways 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 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 to suit your needs. If you want to trade it like 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.
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