Investments in Gold and other precious metals

s_baker wrote: »

I really apologize if this has already been covered, but I was unable to find.

With the current crisis - particularly for those who have substantial savings (which sadly isn't me!), what is the financial advice for investments in Gold, Silver, other precious metals and items of similar value?

Are they better than cash investments, which could go at anytime, or is the value of gold just as likely to plummet?

Thanks.

Investing in commodities and investing in cash are more or less at opposite ends of the risk scale, so don't consider it as an alternative to cash but instead think of commodities as just one more asset class that forms part of your overall investment portfolio. If you don't have an investment portfolio, then learn a lot more before deciding to throw money at commodities, as they can be as volatile as equities but without the dividends.

Only invest gold now if you think the worst is to come.
Its used as a hedge against the apocalypse, the four horsemen dont take visa

LongTermLurker wrote: »

What about AMEX?

Does anyone take Amex? It certainly used to be difficult to find a retailer who did.

s_baker wrote: »

what is the financial advice for investments in Gold, Silver, other precious metals and items of similar value?

For a balanced portfolio a 2.5% - 5% allocation to precious metals is fine. You have an asset class that is behaving differently to the bonds and stocks in your portfolio so, even though precious metals themselves are volatile assets, the overall portfolio volatility is lowered.

Gold isn't a productive asset. So more than 5% is going to start eating into investment returns. Really you're looking at something that is going to track inflation over the longer term while its characteristics as a separate asset class benefit your portfolio.

If you go above 5% then you're probably not following a balanced portfolio strategy. E.g. either you've got specific reasons for sheltering money in gold (e.g. currency depreciation/collapse) or you're speculating that the price is going to outpace other investments.

s_baker wrote: »

Are they better than cash investments, which could go at anytime, or is the value of gold just as likely to plummet?

It's been below $300/oz in the last 10 years. Before than it was as high as $850 in 1980. Gold detractors will thus point out that if you piled into market during the 1980 peak you'd be nursing losses for decades later.

Most people don't buy their investments that way but accumulate them over time. If you've got money you'd want to commit a volatile asset class then consider phasing it in over 12 months until you reach the desired allocation level (e.g. 5%) within your portfolio. And then just buy/sell annually to rebalance (to 5%) while making perioidic accumulations to balance out purchases elsewhere in your portfolio (e.g. stocks).

I wouldn't say gold is an investment in the traditional sense in that you're looking to make a return. Really it's a form of saving in a universal currency that has tended to keep pace with inflation over rolling 5-year periods.

It's among the 'store of value' asset classes. You could bury it in the ground for your progeny to find generations later and it will still be valuable because of its enduring supply and demand. As a hard asset it's not going to be worthless which is a risk with paper assets (e.g. currencies, stocks).

Hope that helps!

Aegis wrote: »

If you don't have an investment portfolio, then learn a lot more before deciding to throw money at commodities, as they can be as volatile as equities but without the dividends.

I'd say the comparison is fine for hard assets you physically own (e.g. gold). But an investments in commodity futures will have it's own returns above spot-price (e.g. roll yield and interest).

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