Check out our FREE investing starter kit, it covers all the basics and has 5 stocks to get you started, go to
Buying gold as an investment — good or bad?
There is a huge portion of financial media that fixates on gold. The most common argument you’ll see is that gold is a hedge for economic collapse – gold is seen as a safe place to store money because it’s been used as a form of currency for thousands of years.
That history, plus gold’s global appeal and limited supply sells a lot of people on the value of gold as an investment. But is it actually a good idea?
As an investor, you’re looking to buy something that will be worth more in the future than it is today. To measure that, a lot of people will look at the “intrinsic value” – or the inherent worth of a company, property, or asset.
Most of this analysis will look at the money the potential investment over time might generate
In the case of a company, you’d look at the expected profits the business would generate over time. As a shareholder, you’re a part owner of the business and so your stock entitles you to a sliver of those earnings. For a business that is growing over time, earnings should go up, and the value of your piece of ownership should follow.
What’s tricky about gold is that as an asset, it doesn’t actually generate cash. The piece of gold you own today will be the same piece of gold 5 years from now, no more and no less.
If you buy a house, you can decide to rent it out, and over time the rental payments you receive could provide a steady flow of cash. Alternatively, you can live in the house and instead of paying rent month after month, you would be making mortgage payments and building equity over time in an asset that is capable of creating cash flows.
On its own, gold can’t generate cash, which makes it harder to value.
The value of gold is really tied to its scarcity – that gives it value in the jewelry market and it makes it useful as a store of value and means of exchange.
Some of you probably heard that and thought “what the heck does that mean?”
Globally, gold is recognized as a precious metal, and that worldwide recognition means it readily can be exchanged across borders and cultures, which is part of the reason why major institutions like central banks maintain gold reserves.
It’s also why some investors want in on gold.
They view it as a hedge against economic instability and inflation. Paper dollars, like the US dollar are “fiat currency” — meaning they have value because we say they have value — sound familiar?
So, if events unfold that lead people to question the value of a fiat currency, OR the government takes actions that change the value of a currency — like printing waaaaay more bills and giving them out to people — the currency can lose value. If a currency loses value, the relative value of gold, as expressed in that currency, will shoot up, allowing investors in gold to profit.
Some people keep money in gold because it is less tied to any one government and isn’t as impacted by inflation or an economic collapse in any one country.
But it’s merit as an investment really depends on the timeline you’re looking at.
From September 2008 to August of 2011, the price of gold went up over 100% while stocks in the US eeked out 1% gains on a total return basis.
There’s money to be made investing in gold, but it comes down to being right about gold at the right time — because gold tends to surge in value when major financial systems are struggling.
Since September of 2011, stocks have returned over 180% on a total return basis while the price of gold has fallen nearly 30% AND the returns of the S&P 500 trounce those of gold on a 1,3,5, and 10 year basis.
And for people with a very long time horizon, since 1990, The S&P 500 has posted 1,400% gains on a total return basis. Over the same nearly 30 year period, gold has returned 220%.
If you are worried about an economic downturn, it may make sense to have a small portion of your portfolio in gold, but it certainly shouldn’t be your main investing strategy, and for many time periods, you’d be better off being all in stocks.
————————————————————————
Subscribe to The Motley Fool’s YouTube Channel:
Join our Facebook community:
Follow The Motley Fool on Twitter:
…(read more)
LEARN MORE ABOUT: Precious Metals IRAs
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
REVEALED: Best Investment During Inflation
In 2001 gold was 250 per ounce it’s at 1710 today that 684% in crease if you invested 50,000 back than it would be 342,000 today don’t see how that a bad investment
Anyone who thinks Gold is a bad investment is a clown.
From Motley Fool. Go figure.
Still believe what you were smoking?
Enjoyed that thank you.
Gold is not an investment. It's a way to stop losing money to inflation. We all need savings regardless of investments.
Why not save it in gold?
You mentioned property well House price also drop dramatically in a short period of time
Not convinced by all your saying
But great vid
But it's so pretty.
totally wrong this video . if a person invest in gold they will get money easily but the thoughts is really bad .gold never collapsed the economy people who have gold they are rich in bad time
That's a kicking soundtrack.
Gold can't be a hedge against anything because there is an unlimited supply. You don't know how much gold there is. So how can you value it? Every year TONS of gold is discovered. Yet that doesn't affect the price. The only reason gold has value is because it's manipulated. It's souced from Africa, but European and Chinese put their stamp on it and call it certified.
Cash is an exchange of services for financial continuance it keeps people on the move having to keep their finances in check. Without work the cash flow will run out with nothing to backup their finances leading to failure to pay mortgage banks or creditors eventually starvation and homelessness.
Hello Mrs Sarah is legit and her method works like magic I keep on earning every single week with her new strategies.
When they telling you don't buy gold it's also the right time to buy as much as you can…
In India there are only two Assets :
1) Real Estate
2) Gold
Lol…..I was like…'this seems off' and then I saw it was from TMF and I was like oohhhhh okay
Yearly growth of gold between 2021 to 2022 in india 29% till today.
This video brought to you by JP MORGAN and the federal reserve
nicely done, good points
Gold is like fine art. It's not income producing, but it's something you could sell or exchange for something else incase nobody will accept your money (fiat money). Gold just comes in a smaller denser form than fine art.
Why would nobody accept your currency? Imagine if the power grid shut off, which could occur via natural disaster… A cyber attack could do the same, or it might just disable the internet, or just the banking system.
Imagine you can't access your bank account. There would be a handful of dollar bills in circulation. How long would those be accepted as payment? Would there be a sufficient number of them in circulation?
I want to save my money in gold buy i am scared
It’s a hedge, an investment, insurance. It holds it value better than paper/digital money. It’s a finite resource, it’s used in many things. It has a long history. It’s respected as valuable and always will be
Considering since ~2000, the gold price has appreciated ~676%, I'd say you're wrong about it not being an investment.
Basically hes saying gold isnt good to produce money. Its only used as a means of an economic crisis. But gold is good to secure your fiat money because it retains its value throughout long periods of time
Gold is not investing, its money. Hold you "Cash" and sell it to buy assets.
Fiat is the problem, and the economy is run on this false and inflated asset class.
I hold 40% of my money in gold and silver now, aggresive but i stand by it.
gold is my cash account!
Demonetize housing
can you buy it in the backyard and come back in fifty years and still be worth something? does it have a paper trail? does it require a computer to be tradeable? is it incorruptable
For almost any decade period or longer if you invested in the S&P you would have done better than gold or hard commodities. Everyone I have ever seen who has held it and sold it down the road has barely doubled their money, if that. So basically its a crappy version of an emergency fund, but it is shiny so there's that.
Gold is an insurance. It’s the money of kings and any super power government in the world.
Gold is good for safety plan
Gold is not an investment.
It is a security against when our fiat currency dies.
Gold has been considered money for 1000's of years.
It has stood the test of time against fiat currency.
The rich stay rich, partly with gold