Do you buy gold?

Merryn Somerset Webb at the FT recently discussed buying gold as her hedge against inflation. She is keen. I disagree. A few years ago I was interviewed on Moneybox about gold. My final comment was ” Warren Buffett sees no need for gold in his portfolio, and what is good enough for him….”

The point is not whether you agree or disagree, but it’s all about numbers. Merryn talks about a hedge, but what does that mean? She mentions no detail about how much to hedge a portfolio? 5%? 10%? 50%? Here’s the problem. If you hedge 10%. In other words, allocate 10% of your portfolio into gold. How easy is that? What do actually buy? How do you hold it? It’s not that straightforward. Assuming you’ve done the deal. You now own 10%. Now 10% of your portfolio doesn’t earn any income? How long before that impacts on your long-term returns. And if you are right and inflation surges and gold is the answer, is 10% going to make that much of an impact? Have you looked at the numbers in detail? What are you losing over time when you have no income?

If you are a trader rather than an investor, it means you are playing the betting game. If you want the hedge, you can buy gold now and place a bet. If you believe, then why not bet big. I prefer to take the long view. Maybe that’s why Warren Buffett is not a fan either.

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Wine, Art, Cars, Coins, Watches, Diamonds…

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Making good financial decisions relies on basics

Investment costs. They are always more than you think they are. Simple arithmetic shows that the more you pay, the less you get. Wealth coaching helps you have a clearer picture of investment costs. Investment performance. Very few individuals have any clear strategy for measuring the performance of their portfolio. Without understanding what you are trying to achieve, it is impossible to be clear if you have been successful or not. Wealth coaching will help you understand more about performance measurement, which in turn can improve your decision making Investment risk. Most individuals tend to summarize their risk as low,...

Do you buy gold?

Merryn Somerset Webb at the FT recently discussed buying gold as her hedge against inflation. She is keen. I disagree. A few years ago I was interviewed on Moneybox about gold. My final comment was ” Warren Buffett sees no need for gold in his portfolio, and what is good enough for him….”

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