I know the market is down so it should be a great time to invest, but I’m still skeptical so I am thinking about investing in gold, which seems to have a decent rate of return over the long haul. How do I go about invest in it? I don’t want to have gold myself, but how do I simply invest in it? Futures or something? Thanks in advance.
Well, what would you suggest as an alternative? Nothing really seems that great.
It would be incorrect to make the argument that "gold has been good investment for the long hall."
According to Chase Global Digest, Gold is the 2nd worst investment in history after diamonds.
It took gold nearly 25 some odd years to go from it’s previous high to next high again. So basically it took 25 years to break even in gold (not even factoring inflation) if one bought it at it’s early 1980’s high.
This assumes gold was purchased using U.S. Dollars.
30 year gold chart
http://goldprice.org/30-year-gold-price-history.html
I was trading gold for a while, and exited the position on or about 02-20-2009 when Gold broke over $1000/ oz. (again) and been out of it since.
If you have never traded futures before I would not be jumping into that. I have been in this biz for 20 years and still would not be trading futures. It is a very complex investment, and is highly risky. I leave this to the professional futures traders to figure out.
I may look at it only if the economy show signs that it is going to plunge further near term, banks are semi-nationalized, or another shoe drops in the market.
Most popular gold trading is the indexes:
GLD = 1x long gold
DGP = 2x long gold
edit:
If I was to look at an alternative it would depend on one’s age, risk tolerance, time frame, and overall financial goals and financial picture.
If one has debt such as CC debt, I would pay that first.
Long term I have been repeatedly posting this as a basic strategy:
S&P 500 Index
in a Roth IRA
Dollar Cost Average bi-monthly
Do this for 15-20 years+
edit/follow up comment – reality check: ——————————
"Net adviser fails to mention gold adjusted for US dollar inflation is at $3500 per ounce."
I’m not sure how long the other poster has been a broker and a what kind of broker, but that would not be a correct statement.
If one factored inflation on an investment one would SUBTRACT inflation from the return of the investment.
Example:
If inflation was 3% in one year, and you made 6% on your money, your inflation adjusted return would be 3% (6% return less 3% inflation = 3% inflation adjusted return).
This is why bank CD’s, and money markets tend to be poor investment choices over the long term. They almost always pay less than the inflation rate, thus over time, one loses their buying power. Most people get it that things cost more over time. This is inflation. We don’t get free extra money just because there is inflation. Your mutual fund company does not send you an extra check each year based on the inflation rate. The stock your holding does not send you a check because inflation went up. Your car manufacture doesn’t send you a check if the value of your car drops because of inflation. Most jobs don’t have a pay increase each year to keep up with inflation either.
Unless one has something like TIPS – "Treasury Inflation-Protected Securities," for example, one will not get paid more money on their investment because of inflation.
http://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm
I ran historic inflation models when I worked at a top Wall Street firm for clients to show what inflation does to money over time – it eats it away (things costs more).
Based on historical inflation models, generally over 30 years $1.00 cash will have a buying power of 30 cents. Thus investment in Gold on or about 1980, at $1,000.00 an oz, the inflation adjusted return would be roughly $300.00. This is because gold did not keep up with the net increase of inflation. That is why Chase Global Digest research has said it is the 2nd worst investment after diamonds.
To say that gold is worth by any calculation $3,500 or whatever, is absurd. Tell ya what. I’ll buy gold in the open market at today’s price of about $950.00 an oz, and you tell me you are dying to buy it from me at $2,000.00 oz. right now. If you think your answer is correct, then you’ll make $1,500 oz. Now try selling that in the market, and you’ll wonder why there are no bids at that price.
http://www.hoover.org/research/factsonpolicy/facts/4804201.html
One last note:
RE: other poster: "Dollar…gold…they will catch up to each other, guaranteed…"
As a fmr Securities Compliance Officer, it is unlawful – a violation of U.S. Securities Law to state, suggest, imply, infer, etc., ANY guarantees, on investments. By making such statement, one could be fined, sued by a client following such advice, or suspended by regulators or all three.
Here are some compliance law websites a domestic securities, commodities, futures, broker should know and is REQUIRED by law to follow.
Broker Misconduct
http://www.usinvestorlaw.com/types-of-stock-broker-misconduct.php
http://www.securitieslaw.com/complaints.html
Fraud and misrepresentation
http://www.securitieslaw.com/causesofaction.html#fraud
Misrepresentation and Omissions
http://www.stockbroker-fraud.com/lawyer-attorney-1133453.html
I’m not doing this to censure the other poster, I’m point out that a licensed rep is required to know securities rules and regs. And by posting such info in question, is misleading to the unsuspecting people who are not financial experts and who may incorrectly rely on false and misleading information.
This is why I have repeatedly suggested on Y!A and toother to seek professional advisors with no less than 15 years real market experience.