The key reason why Setting up Cash cow isn't a good strategy

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Buying gold as an investment — good or bad?

There is a huge portion of financial media that fixates on gold. The most common argument you’ll see is that gold is a hedge for economic collapse – gold is seen as a safe place to store money because it’s been used as a form of currency for thousands of years.

That history, plus gold’s global appeal and limited supply sells a lot of people on the value of gold as an investment. But is it actually a good idea?

As an investor, you’re looking to buy something that will be worth more in the future than it is today. To measure that, a lot of people will look at the “intrinsic value” – or the inherent worth of a company, property, or asset.

Most of this analysis will look at the money the potential investment over time might generate

In the case of a company, you’d look at the expected profits the business would generate over time. As a shareholder, you’re a part owner of the business and so your stock entitles you to a sliver of those earnings. For a business that is growing over time, earnings should go up, and the value of your piece of ownership should follow.

What’s tricky about gold is that as an asset, it doesn’t actually generate cash. The piece of gold you own today will be the same piece of gold 5 years from now, no more and no less.

If you buy a house, you can decide to rent it out, and over time the rental payments you receive could provide a steady flow of cash. Alternatively, you can live in the house and instead of paying rent month after month, you would be making mortgage payments and building equity over time in an asset that is capable of creating cash flows.

On its own, gold can’t generate cash, which makes it harder to value.

The value of gold is really tied to its scarcity – that gives it value in the jewelry market and it makes it useful as a store of value and means of exchange.

Some of you probably heard that and thought “what the heck does that mean?”

Globally, gold is recognized as a precious metal, and that worldwide recognition means it readily can be exchanged across borders and cultures, which is part of the reason why major institutions like central banks maintain gold reserves.

It’s also why some investors want in on gold.

They view it as a hedge against economic instability and inflation. Paper dollars, like the US dollar are “fiat currency” — meaning they have value because we say they have value — sound familiar?

So, if events unfold that lead people to question the value of a fiat currency, OR the government takes actions that change the value of a currency — like printing waaaaay more bills and giving them out to people — the currency can lose value. If a currency loses value, the relative value of gold, as expressed in that currency, will shoot up, allowing investors in gold to profit.

Some people keep money in gold because it is less tied to any one government and isn’t as impacted by inflation or an economic collapse in any one country.

But it’s merit as an investment really depends on the timeline you’re looking at.

From September 2008 to August of 2011, the price of gold went up over 100% while stocks in the US eeked out 1% gains on a total return basis.

There’s money to be made investing in gold, but it comes down to being right about gold at the right time — because gold tends to surge in value when major financial systems are struggling.

Since September of 2011, stocks have returned over 180% on a total return basis while the price of gold has fallen nearly 30% AND the returns of the S&P 500 trounce those of gold on a 1,3,5, and 10 year basis.

And for people with a very long time horizon, since 1990, The S&P 500 has posted 1,400% gains on a total return basis. Over the same nearly 30 year period, gold has returned 220%.

If you are worried about an economic downturn, it may make sense to have a small portion of your portfolio in gold, but it certainly shouldn’t be your main investing strategy, and for many time periods, you’d be better off being all in stocks.

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20 Antworten auf „The key reason why Setting up Cash cow isn't a good strategy“

  1. These young guys have been in a bull run for so long they forget about market cycles.  When trouble comes and the market starts to freefall, the vast majority of the panicked will go where?  Gold of course. God by itself is not the best investment, but you cant have a well diversified portfolio without it.

  2. As someone who recently ALMOST bought $200,000 worth of physical silver I can tell you the Real problem. Ready?

    It's the spread. You're going to lose 10 percent getting in and getting out. Which means…

    All you can do with it is hold it and wait for the economy to come crashing down. Oh, sure, that's gonna happen at Some point. You can't possibly run a country the way this one has been run and not have it blow up.

    But 10 percent swings are rare events. And 10 percent only gets you to the break even point. That's when you Start making money. And, yes, you can offset that through lol leverage. But those interest rates will eat you alive.

    So if not metals then what!

    What you want is an investment that allows you to make money on the way up OR on the way.down. Something that allows KEEP the money you make rather than surrender it in commissions to your supplier. There is a fortune to be made in those 5 to 9 percent swings that would have you sitting on the sidelines, and.losing your mind, as a metals investor.

    The answer is…

    Look into trading futures and focus on risk management. Remember, risk management is VITAL!!!

    Now, if it makes you feel any better, you can send me 10 percent of your seed money and pretend I'm your metals vendor.

  3. this guy obviously has no gold -no idea – take out your smp 500 after inflation every year and then look at golds value every year at same time – gee i wonder why the richest families in the world have over 30 percent of there wealth in gold –

  4. I think most people know gold is not really an investment for growth although you can trade it that way if skilled using leveraged contracts. People buy gold as a kind of insurance policy in case the dollar becomes weak or collapses entirely as you said. Its used more capital Preservation during economic turmoil or possible economic collapse.

  5. Today's gold price is 50€ , for less then 10 years price is 100€. Quick calculation on my phone, whalla its fuckin perfect investment, Idiot

  6. yeah nice one i like it i think…….. wait nvm stock market not reliable what if a crash happens then wow all that money invested in the market goes bye bye but with gold and silver i will still have that. hmmmmmmmmmmmmmmmmmmmm it might be a lose of some money but at least i'll still have money just saying. GREAT DEPRESSION.

  7. I wish I had an investment that paid me goldflows, not cashflows… I don't like receiving an asset that my government has promised to reduce in value no matter what.

  8. Gold goes up as stocks go down. It would be stupid to ride stocks down when you could ride gold up instead. The trick is to time it correctly.

    And be careful with leverage. My gold dealer has 14 years in the field. That means, even if he's right now, he's been wrong the last 10 years. Interest will eat you alive waiting for them to be right

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