• 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5

Got Gold?

#1
Why you chose to invest in Gold, or avoid it?
 
Investing in Gold seems to be quite controversial, with two different schools of thought about the usefulness/credibility of Gold as a long-term asset in an investors portfolio. Some treat it as a wealth preservative over long run, hedge against hyper-inflation and paper-money devaluation, safe haven during global tension, etc. Some treat it as a loser asset with no return, one with questionable intrinsic value as a commodity, irrelevant in the age of modern money, etc.
 
The investors in this community generally fall into one of the three categories:
1. Those who researched on Gold and decided to make it a part of their long-term portfolio
2. Those who researched on Gold and took a conscious decision to exclude it from their portfolio
3. Those who haven't thought much about Gold investment
 
If you happen to belong to category 1 or 2 above, your perspective and investment decision around Gold will be very helpful for all, especially those in category 3. Can you please share your individual choice, specifically along the following questions:
 
Questions for those who invested in gold:
 
1a. What drove your decision?
1b. What % of your portfolio has Gold?
1c. Do you own physical Gold (bullion/bar), or Gold-backed ETF, or a proxy investment (e.g. gold mine stock)? Why you chose this specific investment type?
1d. Did you time your purchase or acquire over time?
1e. Do you have any worry about your choice? Are you going to hold onto it forever or waiting for something before trimming?
 
Questions for those who consciously decided not to invest in gold:
 
2a. What are the specific reasons for avoid Gold?
2b. Do you have any alternative investment that serve the same purpose that Gold is "perceived" to provide? What are those?
2c. Do you worry about your choice and are you planning to revisit at some point in time?
 
Looking forward to learning from your insight.
 
Thanks!
  Reply
#2
Most importantly, No Dividends with gold.

If one bought gold at its high of ~$2100 in 1980 and held to today, that investment would have lost 45% of its value in 36 years.  If the S&P 500 was bought at its 2000 highs (ironically also ~2100), the dividends reinvested, and held to today, it would have returned ~107% in 16 years. Buying into the 500 at the 2000 highs would have been incredibly poor timing, but if held you would have at least doubled your money by today.  Not so fortunate for those buying gold at its 1980 high, they'd still be in the hole even though the time frame is over twice as long.  If over the years one cannot correctly time the stock market, how can one expect to time the gold market?  Especially since timing in the gold market has historically proven to be much more crucial if one is to profit.
  Reply
#3
(11-29-2018, 11:48 AM)Kwill Wrote: Most importantly, No Dividends with gold.

If one bought gold at its high of ~$2100 in 1980 and held to today, that investment would have lost 45% of its value in 36 years.  If the S&P 500 was bought at its 2000 highs (ironically also ~2100), the dividends reinvested, and held to today, it would have returned ~107% in 16 years. Buying into the 500 at the 2000 highs would have been incredibly poor timing, but if held you would have at least doubled your money by today.  Not so fortunate for those buying gold at its 1980 high, they'd still be in the hole even though the time frame is over twice as long.  If over the years one cannot correctly time the stock market, how can one expect to time the gold market?  Especially since timing in the gold market has historically proven to be much more crucial if one is to profit.

Yes as you point out, Gold can be a really bad investment because it doesn't compound, lacks a natural/predictable return on capital, and has a subjective/perception-based valuation. Using Gold for capital gains is definitely much harder and timing-dependent than stock market. As far as I know, the capital gains are also taxed at a higher rate.
 
However, if Gold is used for long-term hedging or some sort of insurance, then there's apparently a general agreement that its price will hold or increase in such extreme situations - or at least I think that's what Gold investors like to believe. I personally know someone who has a business in East Africa and lives there with family. He buys Gold coins every year with 10% of his annual saving. He does not plan to sell even if the price goes up - he uses the physical Gold as a safe haven that he can hold on to in case the instability/economy of the country goes haywire, causing a major disruption. If nothing bad happens, he will probably pass those on to his heirs.
  Reply
#4
I purchased RING in August, and I am down 20%.  I got it as a backstop in case the equity markets got unstable, and I needed some additional Basic Material positions for my asset allocation balance.  My RING position is under 3%  (correction 0.5%) of my portfolio.  I have a limit sell order outstanding, but it is far off.  I liked the short term trading prospects last summer for the miners as I day-traded this issue several times.  I got caught in a down draft.  When I eventually sell, I will buy a Mineral/Natural Resource ETF as I feel RING is too focused.
  Reply
#5
I do not invest in non-productive assets like precious metal or commodities.  I prefer assets that support companies in the US economy and the other economies of the world.  Gold does not pay a dividend or interest.  Companies have earnings and either pay dividends or have at least the potential to do so in the future. Companies employee people.  There is no P/E or PEG for gold. It is worth only whatever people will pay for it, and is therefore cyclical and speculative in nature.  Note that if I lived in North Korea, however, I might want to have some physical gold to use while I try to escape.
 
The main argument in favor of gold and similar investments is that they may be less correlated with other assets, so they may do well when others do not. 
 
I am in favor of investing in assets that not only are less correlated with other assets but also have the potential for real growth as the economies of the world expand. At best - over the VERY long term, hundreds of years - gold has kept even with inflation, sometimes doing worse, sometimes doing better. On the other hand, over long periods, there are other assets that have consistently out-paced inflation and have had real growth.  I prefer to own these types of assets rather than a sterile asset like gold.
 
If I were to invest in gold, I would do so via a low-cost ETF like IAU
  Reply
#6
Invest? No.
Speculate from time to time, hedge or insurance from time to time.
I bought silver (physical) 2015 around and under $15 (all on ebay through known good sellers), but didn't sell it in 2016 when over $20. I am an idiot, what can I say, other than I didn't want to dig it out of the safe and drag it to the shop or try to list it myself. I did however buy an inverse silver fund in one of my IRA's when silver was a chunk over $20, so that makes me an inverse idiot, and that much closer to retirement and the silver in my safe.
  Reply


Forum Jump:


Users browsing this thread: 1 Guest(s)