When you read in the news that a person whom you know as rich and wealthy is in financial trouble or has declared bankruptcy, it is easy to feel a sense of futility about managing your own money. Y…
The author indirectly defines speculative investments as “trying to beat the market”. The article discusses the idea that investing in a diversified fund is “investing” where picking individual stocks could be considered “speculation”.
I am not a finance person but my understanding is that buying gold isn’t a way to get rich. It’s just a way to preserve wealth when everything else is being devalued. The old trope being “An ounce of gold has always bought a nice suit”. At one point that would have been $1, now it is $1,000. Gold has stayed relatively stable in value, not price. It doesn’t experience wild fluctuations independently of other economic systems. It increases in value (or loses less value) during economic hardship. It also outperforms most assets during times of inflation because it is owned outright; meaning that it can’t suffer from a 2008-style meltdown as the housing market did.
Bitcoin, while being in finite supply, hasn’t experienced what I would call a market stabilisation mainly because of all the hype around crypto currency driving speculative buying. People buy bitcoin because they think it will be worth double in the future, not because they think it will be worth the same when their other assets have devalued. Gold and bitcoin are in the same universe but not the same neighbourhood.
Most modern financial advisors would argue that 25% is quite a high distribution of gold in a profile. Alarmists, crypt-anarchists, and libertarians would probably agree 25% is a minimum.
The reason that I shared the article is because the author discusses things that I hadn’t thought about before. I am not about to run out and follow all the advice to the T but it did make me think about my, mainly uncontested, ideas on personal investment.
Thanks for the reply, and thanks for sharing the article. I’m not sure why it has downvotes, it seems to me that this is the right place to post such an article for discussion with an NZ lens.
I guess gold is considered a good part of an investment because historically it has been stable. I don’t think the author does a good job of explaining why it’s ok that gold’s value in an investment is based on historical trends but they caution against this attitude for other things. But that may be explained simply by them trying to keep the rules and explanations on the shorter side.
I guess the idea is that, while they say you shouldn’t assume the world doesn’t change, this is balanced because gold makes up 1/4 of your portfolio. If the world changed so that gold was less stable, you’d still have 75% of your portfolio in things other than gold.
Also as I understand it, they say this is not a portfolio for the best return, it’s a portfolio hoping to hold your wealth, not get you rich. The idea is just to not lose the money (through inflation or otherwise).
It also may not be as relevant these days. It talks about 6% being a moderate level of inflation but that would be considered high (in the west) these days. Therefore you may not need to focus so much on fighting inflation anymore.
I can’t see the downvotes on the post but I can imagine there are some. It is not popular advice.
I do like that the Off-topic community exists and I like posting random stuff in here to see what conversation it sparks. I’m often surprised at what I learn from people.
The author indirectly defines speculative investments as “trying to beat the market”. The article discusses the idea that investing in a diversified fund is “investing” where picking individual stocks could be considered “speculation”.
I am not a finance person but my understanding is that buying gold isn’t a way to get rich. It’s just a way to preserve wealth when everything else is being devalued. The old trope being “An ounce of gold has always bought a nice suit”. At one point that would have been $1, now it is $1,000. Gold has stayed relatively stable in value, not price. It doesn’t experience wild fluctuations independently of other economic systems. It increases in value (or loses less value) during economic hardship. It also outperforms most assets during times of inflation because it is owned outright; meaning that it can’t suffer from a 2008-style meltdown as the housing market did.
Bitcoin, while being in finite supply, hasn’t experienced what I would call a market stabilisation mainly because of all the hype around crypto currency driving speculative buying. People buy bitcoin because they think it will be worth double in the future, not because they think it will be worth the same when their other assets have devalued. Gold and bitcoin are in the same universe but not the same neighbourhood.
Most modern financial advisors would argue that 25% is quite a high distribution of gold in a profile. Alarmists, crypt-anarchists, and libertarians would probably agree 25% is a minimum.
The reason that I shared the article is because the author discusses things that I hadn’t thought about before. I am not about to run out and follow all the advice to the T but it did make me think about my, mainly uncontested, ideas on personal investment.
Thanks for the reply, and thanks for sharing the article. I’m not sure why it has downvotes, it seems to me that this is the right place to post such an article for discussion with an NZ lens.
I guess gold is considered a good part of an investment because historically it has been stable. I don’t think the author does a good job of explaining why it’s ok that gold’s value in an investment is based on historical trends but they caution against this attitude for other things. But that may be explained simply by them trying to keep the rules and explanations on the shorter side.
I guess the idea is that, while they say you shouldn’t assume the world doesn’t change, this is balanced because gold makes up 1/4 of your portfolio. If the world changed so that gold was less stable, you’d still have 75% of your portfolio in things other than gold.
Also as I understand it, they say this is not a portfolio for the best return, it’s a portfolio hoping to hold your wealth, not get you rich. The idea is just to not lose the money (through inflation or otherwise).
It also may not be as relevant these days. It talks about 6% being a moderate level of inflation but that would be considered high (in the west) these days. Therefore you may not need to focus so much on fighting inflation anymore.
I can’t see the downvotes on the post but I can imagine there are some. It is not popular advice.
I do like that the Off-topic community exists and I like posting random stuff in here to see what conversation it sparks. I’m often surprised at what I learn from people.