Posts Tagged investment

The best Inflation Hedge?

In the last post, I talked about gold as the investment of choice in bad economy. After reading an article from investmentu.com, my current understanding is not quite true. Here is the excerpt:

Dr. Jeremy Siegel, a professor of finance at The Wharton School of the University of Pennsylvania and author of Stocks for the Long Run, has done a thorough historical study of the returns of different types of assets over the past couple hundred years.

What he discovered is dramatic:

  • $1 invested in gold in 1802 would have been worth $32.84 at the end of 2006.

  • The same dollar invested in T-Bills, with interest reinvested, would have grown to $5,061.

  • $1 invested in bonds would be worth $18,235.

  • And $1 invested in common stocks with dividends reinvested – drum roll, please – is now worth more than $12.7 million.

The Ultimate Inflation Hedge - Stocks

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What you need to know about gold investment

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As our market is going through uncertainties both in politic and economic itself, people are flocking to investments that are able to hedge such uncertainties. Many opt for bonds that offer security but less-than-inflation rate of growth. However, there is one vehicle of investments that strive in the time of political and economic struggle. It’s gold.

Before you jump straight into this golden arena, there are few things that you have to know. This guide will ensures that you will be better prepared in Q&A session with your investment advisor.

Question. What kind of gold should I buy?

Answer. Gold comes in many forms. So you have to know which suits you best. First we have bullions or gold coins. In Malaysia, the only bullion coins is Kijang Emas. It’s available through local banks. You can get more info from Maybank page.

If you are not keen to keep the coins by yourself, you can save the hassle by opening gold investment account, like the one offered by Public Bank. This gives peace of mind and reduces unnecessary risk of keeping the real gold in your house.

Q. When should I buy?

A. If you read online articles, they will tell you that it’s always the best time to buy gold. Most probably because those people the ones selling gold. However, it’s quite true but I won’t give you that straight answer. Gold is a limited expensive metal, is not a derivation, have resilient value and rather high liquidity. Besides, the value of gold usually strives when inflation rate increases, currency is having debasement or future economic prospect is in gloom. All of these put gold as a preferred investment when other investment vehicle fail to offer enough confidence to investors.

Q. How much should I buy?

If you would like to have gold as part of your investment, it’s best to consider it as a low risk low return investment. Having said that, I would say 10-30% is a good range when economic is having a good time and you can increase it if you are expecting economic slowdown. That’s it if you are a speculative investors, if not, just do regular investment on gold and you should be fine.

Q. How about gold stock?

A. Gold stock are shares of companies that deal with gold mining, extraction, processing and minting. While it’s closely related to gold, it’s still stock, not precious metal. If the stock rides on the bull market because of gold, you are lucky but it doesn’t offer the same qualities that people seek by investing in gold. So make sure you know what you are doing.

Q. Where can I track daily gold price?

A. Kitco has a good graph of daily gold price movement on their site. Check it out.

Q. Ok, I’m interested, what should I do now?

A. If you are ready to make gold investment, go to nearby bank and ask them about it. You’ll learn a lot more when you already have basic of gold investment.

Good investing

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