I’m Buying This Precious Metal This Week

I’ve never been a gold bug.

Typically, I don’t believe the world is coming to an end. And if it does, I don’t expect that owning gold will help. Much of that thinking is influenced by my father-in-law’s experience escaping the Nazis in Europe.

[ad#Google Adsense 336×280-IA]As his family left Poland, his father took all of their precious metals and stones, assuming that their value would help the family in their escape.

It did… sort of. They were able to trade a diamond ring for a loaf of bread… exchange some gold for not being given up for a night while hiding in the woods.

In other words, when the spit hit the fan, their gold and other precious items helped them navigate tough times, but did not retain their value.

Not even close.

That doesn’t mean those things are worthless. It simply means that I don’t own them thinking they’ll maintain their buying power if things get really bad.

So although I’m not hoarding gold, I still own precious metals as part of a diversified portfolio.

The Oxford Club’s asset allocation model recommends that 5% of assets be invested in precious metals. So that’s what I aim for.

If the dollar sinks, theoretically, gold should go higher. If there is economic or political upheaval in the world, again, in theory, gold should go higher. Having 5% of your assets in precious metals should help offset some losses in stocks or other assets in periods of extreme volatility.

But you should not have much more than 5% invested.

Investors who have a large amount of their assets in gold or other precious metals over the past five years not only got their heads handed to them, but they also missed out on significant appreciation in stocks, bonds, real estate and other investments.

But with gold and silver trading near the levels they were during the financial crisis, now might be a good time to establish that 5% position if you haven’t done so already.

There are several inexpensive ways to do this without having to store gold bars or jewelry in a safe-deposit box.

  • ETFs – You can buy the SPDR Gold Trust (NYSE: GLD) or iShares Silver Trust (NYSE: SLV). These ETFs trade like stocks, have low expense ratios and more or less track the performance of gold or silver. So if gold or silver go higher, you’ll make money. If they go lower, you’ll lose money.
  • Mutual Funds – There are many mutual funds that invest in precious metals. The Oxford Communique’s Gone Fishin’ Portfolio, includes the Vanguard Precious Metals and Mining Fund (Nasdaq: VGPMX). Like many Vanguard funds, this fund has a very low expense ratio (just 0.29%). It invests in mostly the stocks of miners of precious metals, not the metal itself. Its largest holding is Dominion Diamond Corp. (NYSE: DDC) at 7% of the portfolio.
  • Everbank MarketSafe® Power Metals CD – This is a five-year CD that guarantees your principal. If gold fell to $200, you would receive 100% of your investment capital back. But if the price of gold and other metals rises, you can make up to 45%. The CD is only open for funding until July 9, so if you’re interested, check out the information today. (The Oxford Club has a business relationship with Everbank, but we’d recommend its products even if we didn’t.)

This week on Oxford Club Radio, I spoke with Everbank Global Markets Chairman Frank Trotter about how the MarketSafe® Power MetalsSM CD works, the peculiar timing of this unique product’s launch (with gold prices so low) as well as Greece, Europe and interest rates here in the U.S.

Even though I’d rather talk about and invest in income-producing stocks, I’m adding some gold to my portfolio this week. I’m below the 5% threshold. And with gold and silver prices so low, it’s not a bad time to get back up to 5%.

Good investing,

Marc

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Source: Wealthy Retirement