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OT - Buying Gold as an investment.


1tallbassguy

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I am selling some gear.

Instead of putting that money back into musical gear, which is the norm, I want to buy a couple or three ounces of gold.

I really like the Canadian Maple leaf because of the purity, it's the best.

 

Anyone have any advice for a newb at gold investing?

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I remember the buying craze in the early 1980s. I was amazed at the amount of people that bought in at $800 and lost a ton in the following 12 months. The history's not the same but I think it's a crappy investment .........well..the medallion thing might be worth the trouble......cuz.....ya know....chicks dig that stuff!

 

My advise......................buy land...they ain't makin' anymore of it!

 

PD

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Gold tends to increase in value long-term, but now that it's no longer tied to most currencies it's stabilized at around the rate of inflation so you're not going to see a huge return on it long-term.

 

An interesting property of gold as a commodity, which makes it very desireable for trade, is that its value goes up when stocks go down. This is because it's so stable normally. When the stock market tanks and the bond market looks shaky, people tend to move from stocks to gold (normally stocks and bonds are also inversely related, but a major economic downturn like 2000-2002 usually puts both in the crapper because the Fed lowers interest rates, so bond yields go with them). Through simple S&D economics, when more people want a slice of a relatively inelastic commodity, the price skyrockets. So, if you buy gold now, hold it even if it loses value; it's always worth SOMETHING, and during a recession you'll earn money on the gold that you can then put into blue chips, which will fall with the rest of the economy but would have every expectation of recovering. Then as the economy approaches what you'd consider a peak, take some out of the blue chips and start investing in gold again. This buy-low, sell-high cycle takes a long time (years) but it's very predictable and makes good money long-term.

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I'd say if you are collecting for something to pass on to your children, or even involve your children in the collecting, precious metal coins are OK. Don't forget that the metal market is unpredictable, you may have to pay commissions for sales, and many sales involve an independent appraisal (more $$).

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Buy an S&P Index fund or low/no risk bonds. The index fund matches the S&P 500 gains/losses & the funds have very low expenses. Vanguard has low expense ratio index funds. Mutual funds are managed by someone & have higher expenses, thus they take more of your profits as a fee. Over the long term most mutual funds will underperform the index funds due to the higher expense ratios.

 

Mutual funds can be better if you are confident in the money manager & that he/she will consistently beat the market to earn the higher expense ratio. Having your own diversified portfolio of stocks is the best, but the degree of time invested goes up as you need to educate yourself on the market & follow your stocks & the market pretty closely.

 

Based on the fact you want to buy gold & just forget about it. I think the index fund would be best & then low risk bonds if you really want to be safe & just hold them until maturity.

 

Buying land/real estate or individual stocks seems like more work than you want.

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"be prepared to lose money"


That means it's just like music gear, right?


I want to hold on to it long term, for my daughter.

 

 

If it's long term, you should go with equities (mix of US and international), not gold.

 

Remember, the price of gold is not based on inflation, it's based on people's perception of future inflation. As a long term investment, it's poor, imo, especially compared to stocks.

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I'd say if you are collecting for something to pass on to your children, or even involve your children in the collecting, precious metal coins are OK. Don't forget that the metal market is unpredictable, you may have to pay commissions for sales, and many sales involve an independent appraisal (more $$).

 

 

You also need a custodian, or if that's you, insurance.

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Since this is for your daughter, and long term, you're a fool (with very few exceptions) if you don't contribute to a Roth IRA (if you qualify).

 

It's not just a retirement vehicle - it's a better education savings vehicle than a 529 plan. Or almost anything else.

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It's not just a retirement vehicle - it's a better education savings vehicle than a 529 plan. Or almost anything else.

 

Just out of curiosity, what do you do for a living?

 

We have some finance guys who work with us and I finally caved and we started 529's for both of our girls. Couldn't put my finger on it but there was something about them that bugged me, still does. What are your reasons for pushing Roth's? I looked at them what seems like many, many years ago and I don't remember all that much about them.

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Unless you are an expert investor or plan to seriously watch the markets of gold or stocks...

 

Find a 4-5% yield money market savings account and drop your money there.

 

If you get a 401k bonus from your employer, invest the max in that.

 

If you just keep plunking money into a 5% account you'll 9 times out of 10 do better than playing the markets.

 

There are TONS of hidden fees in stock markets that will nip your profits in the bud. Selling gold can, I'm told, be the same way, but i do not know first hand about that.

 

So, find a money market savings account and stockpile it.

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Just out of curiosity, what do you do for a living?


We have some finance guys who work with us and I finally caved and we started 529's for both of our girls. Couldn't put my finger on it but there was something about them that bugged me, still does. What are your reasons for pushing Roth's? I looked at them what seems like many, many years ago and I don't remember all that much about them.

 

I'm a CPA but I'm not a financial planner. I just dabble. :)

 

I've heard the 529 fees can be excessive (but I understand that's improved since 2002, when 529's were red hot after the tax change), and that if your child doesn't go to college (it's possible), you're limited. Check on those fees. You can setup a 529 almost anywhere, like Vanguard (super cheap, generally), no?

 

But mostly I subscribe to the "help yourself first, then your kids" mantra and believe that, with many financing options available to students, that you shouldn't save for your kids in lieu of saving for your retirement.

 

I just think Roths are great because you earn money tax-free and you can withdraw your contributions anytime, for any reason, tax and penalty free. Of course, you don't get a tax deduction (I'd rather pay the tax now anyway), you can only contribute $4K a year (2007 limit), and if your AGI hits $95K (single taxpayer, I think it's $155K married (?)), your contribution limit begins to phase out. But overall, I love the tax break on earnings combined with the flexibility of withdrawal if I hit an emergency.

 

I also have a 401k (with matching) and a pension, so I'm becoming "retirement diversified." I like that because I have no idea when I'm going to retire, or what the tax laws will be. I do plan to supplement my retirement by playing music somewhere (I should be good enough then). :)

 

Edit: Oh, I forgot to add that, after 5 years, you can use a Roth's earnings for higher education. I think there might a $10K limit, though. I know $10K ain't much these days.

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