Comments on: Ask Jean: No Golden Rule http://www.jeanchatzky.com/investing/ask-jean-no-golden-rule/ Wed, 10 Mar 2010 16:02:12 -0400 http://wordpress.org/?v=2.8.4 hourly 1 By: paulmlad http://www.jeanchatzky.com/investing/ask-jean-no-golden-rule/comment-page-1/#comment-185 paulmlad Tue, 28 Jul 2009 14:04:47 +0000 http://www.jeanchatzky.com/?p=1408#comment-185 As a CFP practitioner and educator, I believe that today's economic & financial environment makes gold (and silver too) a very important part of any portfolio. Financial planners that refuse to recognize the value and importance of precious metals in their client's long-term investing strategies are, unfortunately, doing a dis-service to themselves and, more importantly, to their clients. Gold is more than merely a hedge against inflation and other economic difficulties; it is a proven investment in its own right. Gold has had 8 straight up years. It is up over 250% since January 2000. The Dow, S&P 500 and the nasdaq indexes are way down during that same time frame. A key benefit of gold is that it does not have counter-party risk. It has its own unique value that is not contingent on someone else's promise or performance. Stocks, bonds, mortgages and currencies can go to ZERO but that is not the case with gold. Gold does not need a bailout and gold can not be over-produced into oblivion. this is a crucial benefit in today's uncertain and risky economic environment. Right now, the government is on a trillion-dollar spending binge which will eventually lead to much higher inflation. many conventional investments will be negatively impacted. Most folks should consider at least 10% of their portfolio in precious metals-related investments. This includes both the actual physical gold (don't forget silver) as well as related investments (such as stocks and ETFs). Thank you! Regards, Paul Mladjenovic www.ProsperityNetwork.net As a CFP practitioner and educator, I believe that today’s economic & financial environment makes gold (and silver too) a very important part of any portfolio. Financial planners that refuse to recognize the value and importance of precious metals in their client’s long-term investing strategies are, unfortunately, doing a dis-service to themselves and, more importantly, to their clients. Gold is more than merely a hedge against inflation and other economic difficulties; it is a proven investment in its own right. Gold has had 8 straight up years. It is up over 250% since January 2000. The Dow, S&P 500 and the nasdaq indexes are way down during that same time frame.

A key benefit of gold is that it does not have counter-party risk. It has its own unique value that is not contingent on someone else’s promise or performance. Stocks, bonds, mortgages and currencies can go to ZERO but that is not the case with gold. Gold does not need a bailout and gold can not be over-produced into oblivion. this is a crucial benefit in today’s uncertain and risky economic environment.

Right now, the government is on a trillion-dollar spending binge which will eventually lead to much higher inflation. many conventional investments will be negatively impacted. Most folks should consider at least 10% of their portfolio in precious metals-related investments. This includes both the actual physical gold (don’t forget silver) as well as related investments (such as stocks and ETFs).

Thank you!
Regards, Paul Mladjenovic
http://www.ProsperityNetwork.net

]]> By: cpareto http://www.jeanchatzky.com/investing/ask-jean-no-golden-rule/comment-page-1/#comment-183 cpareto Mon, 27 Jul 2009 15:34:50 +0000 http://www.jeanchatzky.com/?p=1408#comment-183 I respectfully disagree with some of the info in Dylan's post. Let me also clarify that I too am a fee-only planner (the kind that does not get commissions on investments recommended). Ownership in gold and other precious metals has become much more efficient and cost effective with the use of ETF's (exchange traded funds)like State Street's Gold ETF (ticker GLD, which for purposes of full disclosure are held in my clients' portfolios) or iShares Silver ETF (ticker SLV). The expense ratio of these funds are 0.40% and 0.50%, respectively--significantly less than most actively managed mutual funds. I do agree that the price of gold does, in fact, go up and down over time and there are certainly periods where gold may result in a flat or even negative investment (the same holds true for investments in traditional stocks). That was presumably conveyed in Jean’s post already. Like I mentioned, as with any other investment, gold is not a "sure thing". There are risks involved in owning it. However, gold, unlike other securities does have certain characteristics that make it a unique investment, particularly in extremely uncertain or unstable market conditions which include periods of deflation or severe inflation. That is because of gold's unique property with a dual role as a money and a commodity. Gold is money. Money is hoarded in deflation and hyper inflationary times, so gold should act well during both conditions, we have certainly seen that during the recent economic downturn. I respectfully disagree with some of the info in Dylan’s post. Let me also clarify that I too am a fee-only planner (the kind that does not get commissions on investments recommended). Ownership in gold and other precious metals has become much more efficient and cost effective with the use of ETF’s (exchange traded funds)like State Street’s Gold ETF (ticker GLD, which for purposes of full disclosure are held in my clients’ portfolios) or iShares Silver ETF (ticker SLV). The expense ratio of these funds are 0.40% and 0.50%, respectively–significantly less than most actively managed mutual funds.

I do agree that the price of gold does, in fact, go up and down over time and there are certainly periods where gold may result in a flat or even negative investment (the same holds true for investments in traditional stocks). That was presumably conveyed in Jean’s post already. Like I mentioned, as with any other investment, gold is not a “sure thing”. There are risks involved in owning it. However, gold, unlike other securities does have certain characteristics that make it a unique investment, particularly in extremely uncertain or unstable market conditions which include periods of deflation or severe inflation. That is because of gold’s unique property with a dual role as a money and a commodity. Gold is money. Money is hoarded in deflation and hyper inflationary times, so gold should act well during both conditions, we have certainly seen that during the recent economic downturn.

]]> By: Dylan http://www.jeanchatzky.com/investing/ask-jean-no-golden-rule/comment-page-1/#comment-180 Dylan Fri, 24 Jul 2009 22:49:58 +0000 http://www.jeanchatzky.com/?p=1408#comment-180 Let me start by saying that I am a financial planner (not the kind that sells products or manages investments), and I don't recommend people allocate a portion to gold. First of all, gold is stuff, stuff used to make other stuff. The price of stuff does go up over time; that's called inflation. But in the long-term, we can't expect gold to outpace inflation. Secondly, it is costly to participate in gold investments. That means those expenses will cause gold investments to lag behind inflation in the long-run. Lastly, if you own diversified stock market investments like a total market index fund or international index, you will own some mining company stocks (which are companies, not gold). If you have a separate allocation, you are overweighting these companies. In other words, you are betting that these companies will do better than the rest of the market. Every bet has to have a winner AND a loser. Let me start by saying that I am a financial planner (not the kind that sells products or manages investments), and I don’t recommend people allocate a portion to gold. First of all, gold is stuff, stuff used to make other stuff. The price of stuff does go up over time; that’s called inflation. But in the long-term, we can’t expect gold to outpace inflation. Secondly, it is costly to participate in gold investments. That means those expenses will cause gold investments to lag behind inflation in the long-run. Lastly, if you own diversified stock market investments like a total market index fund or international index, you will own some mining company stocks (which are companies, not gold). If you have a separate allocation, you are overweighting these companies. In other words, you are betting that these companies will do better than the rest of the market. Every bet has to have a winner AND a loser.

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