Saturday, April 08, 2006

Buy Gold, Ponyboy. Buy Gold.

This week, the price of gold hit $600/ounce and silver hit $12/ounce - prices not seen in over 20 years. For those of you who are investors, this is a pretty interesting development.

Now, lest we start some sort of gold-buying craze, with novice, get-rich-quick investors throwing away their life-savings looking for a new “dot-com” boom, it’s important to do your homework on why to buy precious metals. Here is a good article about whether gold is a good buy . Personally, I like Gary North’s advice on the subject. He lays it out in very simple terms. His website is here.

My take? Owning precious metals should definitely factor into every investor’s portfolio plans. Now, as to how much, in terms of percentage of total assets, to own…well, that’s a tricky one, and you are on your own to figure that one out. (I've heard from various sources recommendations from 3-5% of assets, all the way up to an astounding 25%! My sense is, a good level is probably somewhere in between those figures.)

But either way, precious metals are an asset class worth looking at, if for no other reason than to provide some diversification and a hedge against inflation (which the new Federal Reserve Chairman seems to view as a valuable tool to his schemes, and as they will no longer be reporting M3, we could start seeing a lot more of).

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