How much gold should I own?
The structure of a portfolio will depend
upon the unique life circumstances of an investor, but a physical
gold component of 15 to 25% remains solid time-tested guidance
that undisciplined investors ignore at their peril. This is especially
true with volatile financial markets for any investor who tends
to treat their portfolio as though it were a stack of chips at
a high-stakes gaming table in Las Vegas.
To seize opportunities at capital appreciation
a higher gold component may be warranted by awareness of current
events that threaten paper-dominated financial security with
political instability or protracted weakness in markets or currencies,
foreign or domestic. Remember, gold holds its world value precisely
because it is independent of corporate performance and
of the money printing presses of governments.
What types of gold should I
A well-rounded portfolio calls not only
for a gold component, but also for this gold component itself
to be well-rounded. Different forms of gold serve different functions.
Due to their additional numismatic, privacy and security value
relative to bullion items, certain pre-1933 coins are the most
robust investment. While any gold coins are inherently worth
their bullion value, some numismatic coins may be priced very
substantially higher. Their value is determined by their quality,
rarity, and history - starting with the number of coins originally
minted, and subsequently reduced by government recall and melt,
normal wear, and loss, leaving those fewer still available for
Well-chosen investments will target a happy
compromise between gold quantity (see gold
bullion coins) and the additional benefits of numismatics.
You can be sure of a particularly sound investment (privacy
gold coins) though quantity purchases of pre-1933 gold
coins whenever you find them in uncirculated condition at prices
near similar-sized bullion coins.
Where and how is the best way
to buy gold?
To buy your gold, pawn shops, coin shops,
and vest-pocket gold dealers are the most commonly considered
outlets among novice gold investors. These entities operate on
the basis of their existing inventory. As often as not they buy
from the unwary and sell to the unwary. After a visit you may
walk away with a small sum of gold coins, but caution is required
against their common practice of large mark-ups and application
of sales tax. Purchased as an investment product, sales tax on
gold coins should be largely avoidable.
Serious investors seeking to diversify
thousands to hundreds of thousand of dollars in gold will seek
out a reputable gold brokerage to facilitate the exchange at
the best price for delivery to you, or for segregated storage
at a secure facility if you prefer. A gold broker may maintain
a marginal inventory, but due to the volume of their business
they specialize in making a market between their clients and
counterparties - willing buyers and willing sellers. As you should
well imagine, buying gold is serious business - no mere paper
shuffle. From the date of transaction confirmation with your
broker, expect up to four weeks to lay hands on your gold. Time
is required for the transfer and clearing of the payment funds
among the buyers and sellers on each side, for the subsequent
secure transit (sometimes internationally) of the gold between
deposit facilities, and for the final inspection, packaging,
and shipment of your specific order to its destination.
Be wary of the firms that persistently
use high pressure telemarketing sales tactics to bully you into
the purchase of ultra-high-priced and high-commission rare coins.
The gold broker or dealer that is right
for you should be one that is well-connected and involved in
the gold market through a long history of service, is knowledgeable
of macroeconomic conditions, listens to your needs, and offers
advice appropriate for your individual portfolio.
It is recommended that you buy gold as
an ongoing diversification program as your total portfolio grows.
For the smaller investor, associated fixed costs per purchase
such as shipping and insurance may justify a degree of investment
timing - larger but fewer purchases instead of more frequent
smaller ones. But in a market where conditions can change radically
overnight, don't let the pursuit of saving a dollar or two stand
in the way of adding meaningfully to your diversification or
from seizing intermittent purchase price opportunities.
What is the best way to store
Discreet home storage such as in a safe
may be appropriate for values commensurate with your general
household contents, but as your gold stock increases it makes
sense to explore additional avenues for added security. For example,
gold won't burn, but if you live in a high rise or multi-unit
residence, you must consider whether your gold would be recoverable
assuming collapse of the structure in a fire. Safe deposit boxes
at your bank can offer secure storage at reasonable rates. In
this event, pre-1933 gold coins are favored, bearing in mind
the Roosevelt-era gold confiscation which ordered Federal monetary
agents to seize bullion being stored in such facilities.
FOR BUYING GOLD
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