Thursday, December 30, 2010

Great Old Lucrative Dollar

Investing for the future has a lot of people thinking of where they can put their heard earned money to last the longest. Some people swear on stocks, others bonds. Recently, there is another investment idea that is starting to gain more and more speed, but the funny things is people have been investing in it for many years. Chances are you have encountered it numerous times and might be wearing it... Yes, it is gold, but why invest in it? Let's find out shall we?

Why Gold Holds Value Over Time

The supply of gold is constrained, which helps gold hold its value. The gold supply increases very, very slowly as more gold is mined. Gold acts as a hedge against inflation and a store of value over time. In ancient Rome, a single one-ounce gold coin could buy a quality toga, a pair of sandals, and a belt. Today, the same is true: a single one-ounce gold coin is about $1170, enough to buy a good quality suit, shoes, and a belt and have cash left over.

If you think that we'll experience more inflation ahead and that the dollar is likely to continue to lose value, you might be contemplating how to put a portion of your portfolio into hard assets, such as gold. But how does an ordinary person invest in gold?

Gold ETFs

One of the easiest ways to invest in gold is through an exchange-traded fund, or ETF for short. You can think of an ETF as a mutual fund that you can trade like a stock.

Mining Companies

Another relatively easy, but indirect way to invest in gold is through a mutual fund or ETF that owns precious metal-related companies. There are many mutual funds that invest in companies around the world that mine gold and other precious metals.

Gold Coins

Now, ETFs and mutual funds aren't the only ways to invest in gold. Some people like to own gold directly and invest in gold coins. If you do buy coins, it's really important that you do your homework first and buy them from a reputable dealer. You'll also want to store them safely by keeping them in a safe deposit box, for example.

If you have concerns that the government could once again confiscate gold owned by individuals like FDR did back in 1933, you might be most comfortable investing in pre-1933 U.S. gold coins. These coins are considered to be collectibles and, by law, are exempt from confiscation.

Remember to Take It Easy

Lastly, if you are investing in or thinking about investing in gold, it's important not to go overboard because the price of gold can fluctuate a lot. For those of you who want to see how the price of gold has fluctuated over the years, here's a link to create charts that shows the price of gold since 1975.

So after knowing the rub on gold, what are your plans? Would you invest in gold? Share your thoughts and feelings and let us know! Thanks for checking out another blog by your Credit Union!

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