Au.Ag.Mzch
New Member
Not at all surprised by the 'expert' responses of these four financial advisors about gold:
http://www.news.com.au/money/genera...-1226129457485?newscomautrack=news-newsfeed-6
http://www.news.com.au/money/genera...-1226129457485?newscomautrack=news-newsfeed-6
AS gold surges to record highs, should investors rush out and buy the precious metal?
Gen Ys - Justine Davies
Clothes, appliances, cars, electronics: We tend to buy all these goods and most services as well when the prices are low.
When the stocktake sales are on, for example, or when there's a too-good-to-refuse deal on a group buying website.
So why is it that so many of us want to buy our investments when the prices are high? It's irrational.
Anyhow, on to gold and yes, it's at record highs. As Bruce points out, the price of gold has increased more than six-fold in the past decade.
Mind you, if you'd bought gold in 1980, you would have been waiting a long quarter of a century to recoup your money and that's not counting interest.
If you adjusted for inflation then even at current prices you'd still be way behind.
The thing with gold is that, unless you hand it over to a great jeweller, it's just a lump of metal. There's no potential for it to be anything other than it already is.
That's in contrast to investing in shares (where you are buying a slice of ownership of an ever-growing, ever-developing business) and property (where you are buying ownership of not just land and a building but also buying into a growing community).
In other words, shares and property are growth assets in every sense of the word. Sure, that growth can be negative sometimes, but that's simply a buying opportunity.
Shares and property both have the ability to adapt and take advantage of changing markets: to grow as a direct result of human endeavour. Plus they can both pay you a steady income stream along the way.
Gold? No. The price is outside your control, and there's no income. What a lump!
Justine Davies is a finance author with a decade of financial planning experience.
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Gen Xs - Bruce Brammall
For your special girl? Yes, definitely! Particularly if you think a gold necklace, bracelet or earrings will buy you a year's credit for upcoming misdemeanours.
That would be an awesome investment!
But I'm guessing that's not what the editor is asking. And, in any case, it's unlikely to buy a full year's forgiveness for stumbling home drunk, leaving toilet seats up or hesitating, even for a milli-second, on such questions as "does my bum look big in this?"
Buying gold as an investment? Hmmmm.
Gold is on one of the greatest bull runs in the history of ... people using bull runs to describe strong markets.
From less than US$300 an ounce in 2001, it recently topped $US1900 an ounce. Does that make it a good investment? If you bought it at $US300 and sold it now, yeah, I reckon you could call that a GREAT investment.
But the 10-year boom was preceded by a 10-year funk, where it went backwards.
With the usual warnings about "past performance being no indicator of future performance", where's it headed now?
I'm not going to try to kid you. I wouldn't have the foggiest. Clueless. (Now, if Alicia Silverstone wants me to buy her a gold anything, I'm in!)
Reading market experts' views on gold suggests both a bubble and that underlying demand will push it much higher.
But the same rules apply. Gold should only ever be a small portion of a diversified portfolio. Do proper research. Be aware that gold doesn't produce an income. Perhaps buy some quality gold miners rather than physical gold itself.
Bruce Brammall is the author of Debt Man Walking (debtman.com.au) and principal adviser with Castellan Financial Consulting.
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Boomers - Mark Bouris
People have been asking that question since the start of the global financial crisis, and gold has continued to go from record to record since.That's understandable given the level of uncertainty in the world, but buying something at or close to its high goes against the grain.
Let's leave the market risk out of it for a moment and focus on the asset itself. Apart from its unique properties as a metal, a large portion of the gold that's ever been mined is still in existence. As much as there are new finds from time to time it's a reasonable assumption that the supply side will be tight.
When investing, either by way of buying the physical commodity from somewhere such as the Perth Mint or a unit in an exchange-traded commodity fund, what you won't get is an income yield from the asset.
That means your upside needs to come purely from capital growth.
Sure, you might buy it now and sell it in 10 years for 30 per cent more, but you need to weigh the potential growth against the lack of dividend or interest return along the way.
Another way to get exposure to gold is to buy shares in a gold producing company such as Newcrest. After its takeover of Lihir Gold, it's a massive company that produces gold.
It's not an exact replication of the physical market but stocks such as Newcrest tend to rise and fall with the gold price and they do pay a dividend.
Back to that market risk. Before you take the plunge on either a gold stock, physical gold or an exchange-traded commodity fund, have a look at the price graph for the past five years. If you buy, make sure you're diversified elsewhere as well.
Mark Bouris is the executive chairman of wealth management and advice firm Yellow Brick Road.
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Retirees - Kerrin Falconer
Yellow gold, white gold, rose and pink gold. Nine, 14 and 24 carat.
Gold comes in many forms and many people love the jewellery form.
Athletes compete for gold medals. Kings and queens are crowned in it. Rivers of it flow from successful financial transactions. Pirates wore gold earrings. Sunken treasure had plenty of gold bullion. Coins were made of gold and retirees may well have a couple of gold fillings.
Gold has long held an allure as a sign of wealth and a safe haven in turbulent times. You can touch it, see it and feel it, but you can't eat gold.
For retirees, it is all about having sufficient income for everyday living and some extras. Yes, gold has increased in price dramatically to nearly $2000 an ounce.
As Bruce says, it is six times higher today than it was 10 years ago. But there is no income from this physical piece of metal.
It does not pay interest or a dividend on a regular basis.
There is no point in having all your investments in gold as there is no income stream on which to live.
Yes, you could sell a few bars here and there when you run short of money and need to gather some funds together.
But what happens if the market for gold drops, as it invariably will? If you had bought the gold now, you would be selling your assets at a reduced price.
It other words, it is too late to be buying it now. If you had wanted to own gold, you needed to have been buying it at $300 an ounce in 2001.
So to my mind, your gold buying should definitely be restricted to the jewellery form, preferably with a diamond or two attached.
Kerrin Falconer is a financial planner.
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