Gold rates have been at all time high. In almost all the markets globally, the rally has been more that 500% over the last one decade. However, considering the global meltdown around the corner, many of the existing and prospective gold investors must be in a state of dilemma as to what should be their next step. Gold has a certain glamour quotient. Many times, people buy gold without knowing anything about its investment aspect. Following are some of the things that you should know before making the decision of making gold a part of your investment portfolio.
Tips to make the most out of Gold
1 General profile of a gold investor..
Traditionally, gold investment has been the arena of the aristrocratic and wealthy European and Asian families. Recently, Americans too prefer holding gold for the sake of preserving their wealth. We can find several wealthy family trusts set up in USA whose main investment is in gold bullion. But things are changing pretty much. Nowadays, even the average families are trying out gold to park their surplus funds. So, it’s a good news for the middle-class.
2. Typical characteristics of gold which makes its popular…
Gold does not decay. Neither does it suffer the disadvantages of paper assets. Returns from gold is not any company’s liability. Gold does not require maintenance, nor does it go bankrupt! Gold does not represent a company which pays dividend, which has to repay its loans and which has to maintain a good AAA rating. Whatsoever happens, gold always remain gold!
3. Gold is an excellent tool for hedging..
Hedging is nothing but taking a position in an asset (buy or sell) which is exactly the opposite of the position that you have held in your already invested assets. Gold is also a good tool for hedging against the inflation. Remember that if you seek to hedge some financial uncertainty, and also wish to earn return on price movement, than the traditional bullion coins would be a good choice.
4. Be clear as to how much exactly you want to invest in gold
There is no fixed rule for the proportion of gold in your portfolio. However, past experiences of successful investors hint that the rule of thumb can be somewhere between 10% to 30%. You broker at USAGOLD – Centennial Precious Metals can provide you with a clue after studying your position and requirements. However, be watchful about the current economic, political and social scenario before taking your decision.
5. What about gold stocks?
Gold stocks should definitely form the part of your investment portfolio. But one must remember that there is a lot of ambiguity in owning gold stocks. So, gold stocks should never be a substitute for holding the actual gold. Gold coins, bullion etc should definitely be preferred over gold stock. Gold stocks can be treated as a secondary or tertiary medium of investment.
6. Gold futures..are they worth?
Remember that derivatives are ‘financial weapons of mass destruction’. So be extremely careful before taking positions in gold derivatives, especially the gold futures. 90% of the speculators end up losing in a futures deal. Futures can, at best, be used for hedging an existing position.
Gold provides an excellent protection against inflation, deflation, and other market problems. Gold coins and bullion are one of the best instruments of hedging a potential financial uncertainty. Be perfect in you analysis of the company which you are going to deal with and be sure that your goals with respect to gold ownership are congruent with that of that company.
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