Investing in Gold: To Do or Not to Do
Since before we can remember, gold has been seen as a type of currency in a sense. There exists a universal view towards gold as being valuable and stable. It’s seen as being stable because it hasn’t lost its value over the years, while national currencies have been subject to extreme volatility at times. Gold is seen as being able to store its value despite economic turbulence.
What are some reasons why you’d want gold in your portfolio?
The primary allure of holding gold in your investment portfolio all comes back to hedging risk. This is the predominant use of the precious metal in many investor’s trading strategies. If you think about it, gold makes sense as a risk hedging mechanism. Consider some of the following reasons.
Negative correlation with stocks and bonds typically. In other words, when the stock market goes up, gold typically goes down and when the stock market is down, gold is up. This is a good way to play both sides and be prepared for upturns as well as downturns in the economy.
Gold has been seen to withstand the test of inflation. Generally, when currencies become plagued with inflation, you rarely ever see gold prices affected by inflation.
Gold performs well in times of uncertainty. This goes for both financial and geopolitical turmoil as people tend to purchase more gold in these times due to uncertainty around a nation’s currency. This demand helps to drive up prices of gold and so it performs well.
Over the years, gold has grown. Despite price fluctuations, the value of gold has only increased over the years. Gold can present the potential of being a valuable long-term asset since it not only hedges risk, but also appreciates.
Gold is not affected by struggling currencies. As we mentioned, in times of uncertainty people tend to buy more gold. Well, as a result when a currency is struggling people tend to do the same thing.
Now, how can you actually invest in gold?
One option is to go and buy all of the gold jewelry you can find, but there are also some options to invest in the price of gold without actually having it on hand. Here we will discuss three different methods you can include gold in your investment portfolio.
Trading on the commodities market. Your first option is to go right to the commodities market and trade gold directly. Here you can speculate as to whether the price of gold will increase or decrease and hopefully do so accurately. Remember though, this is just one method of investing in gold so if it isn’t for you consider these next two.
Investing in the stock of a gold company. Without investing directly in gold, you can invest in a business whose entire operation is based around gold. This is the next closest option to speculating about gold prices. This is like owning the stock of any other public company. There’s a chance you may receive dividends or hopefully, benefit from capital gains.
Invest in an ETF of gold mining companies. The third option is for you if you like the idea of investing in a gold company but don’t want to rely on a single one. Instead, you can diversify across multiple gold companies through an ETF.
So what’s the wait – are you going to add gold to your portfolio? You can level the stock market playing field once you know what the professional traders know. Our Rich Dad Education instructors will introduce you to trading strategies that produce potential profit when stock prices are falling, and ways to lock-in gains, reduce risk, and squeeze extra money out of stocks in your portfolio.
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