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View Full Version : Money All you investors. Got a question.


tooge
12-02-2008, 11:14 AM
Ok, so the ecomnomy stinks. Everywhere you read there is talk about it getting worse before it gets better. The real optimists think by 2010 we will be turning things around and the real pessimists talk about hyperinflation, the great depression, and the complete colapse of the dollar. I am probably somewhere in the middle, but I really dont know about economics. So, is it wise to start looking at gold as part of ones portfolio? If so, how much by percent? Do any of you buy gold, and if so, how and where?

Swanman
12-02-2008, 11:47 AM
If the dollar collapses against other world currencies, it is good to be invested in commodities, as they are denominated in dollars. It is a natural currency hedge to be in commodities (if the dollar is worth less, your gold becomes worth more in dollars, thus nullifying the collapse of the dollar). Also, commodities have a very low correlation with equity markets, thus providing overall risk reduction in your portfolio.

Personally, I allocate 10% of my portfolio into a commodity-based mutual fund (gold, oil, wheat, etc.). I'm sure you can also buy commodity-linked bonds that are tied to the return on gold futures. Those are two ways to get exposure to gold, without actually buying gold itself.

Stewie
12-02-2008, 11:50 AM
I own a gold ETF (Exchange Traded Fund). It tracks the price of gold by proxy without actually having gold in my possesion. When you buy shares in a gold ETF they in turn actually buy gold from the marketplace and store it.

If you want to buy physical gold (coins, bullion, etc.) good luck. So does everyone else on the planet. You'll pay a premium on top of the spot price. The premium has dropped a little lately but paying >$1000 per one ounce coin is not uncommon. That's with a spot price around $800.

Having 5% of your portfolio in gold is reasonable. If you want to buy coins a couple of reputable places are kitco.com and monex.com. I've never bought anything from them but know people who have. I don't believe their quoted prices include the premium.

If you want to buy an ETF, the largest one's ticker symbol is GLD.

Good luck.

Mark M
12-02-2008, 11:56 AM
Well, both Swanman and Stewie hit the high points, and well.

I also have about 10% of my investments (or what's left of them at this point) in a few commodity funds and they've done pretty well comparably.

As with anything, just make sure you keep things balanced and are willing to ride out the inevitable storms that come up.

MM
~~:shrug:

kepp
12-02-2008, 11:58 AM
I assuming that the advice to buy commodities is mostly aimed at people who are a little closer to retiring? I still have 35+ years to go so I'm staying with the aggressive investments.

Mark M
12-02-2008, 12:05 PM
I assuming that the advice to buy commodities is mostly aimed at people who are a little closer to retiring?

Yes and no.

Even for someone like me (about 30 years away for the "Probably" retirement plan, and 20 for the "Dear God Please" plan), having a small percentage in commodities isn't a bad idea.

I still have 35+ years to go so I'm staying with the aggressive investments.A great idea, depending on when you started, how much (% wise) you have in the aggressive group, and your long-term goals.

The thing about the current panic is that it's driving away a lot of people who could benefit from getting in now -- folks like you (and me) who are decades away from retirement. I've talked with several co-workers who were thinking about doing something drastic (e.g. withdrawing their money until things calm down), but managed to talk them out of it.

I guess a lot of people fail to realize that you have to be in it for the long haul.

MM
~~:shrug:

P.S. If some are wondering, I've written more than 30 articles on personal finance the past five years that have been in Military Money, Stars & Stripes and American Banker. So I do have some knowledge on this stuff. :)

bogey
12-02-2008, 12:05 PM
Is it really a good idea to ride out the storm? I'm 51 and have lost approx. 25% of my investments. Should I just let it ride?

Silock
12-02-2008, 12:07 PM
Is it really a good idea to ride out the storm? I'm 51 and have lost approx. 25% of my investments. Should I just let it ride?

Yes. You're not planning on retiring in the next 5 years, are you? If not, just let it play out. It'll be fine.

BTW, I'm a fan of having at least a small percentage of your portfolio in gold, no matter what your goals are. It provides a good hedge.

bogey
12-02-2008, 12:12 PM
Yes. You're not planning on retiring in the next 5 years, are you? If not, just let it play out. It'll be fine.

BTW, I'm a fan of having at least a small percentage of your portfolio in gold, no matter what your goals are. It provides a good hedge.

That's what I'm doing, but it just feels crazy to sit here and watch it go down, down, down. Why not pull it out and put it in a mattress until it starts going back up?

Mark M
12-02-2008, 12:16 PM
Is it really a good idea to ride out the storm? I'm 51 and have lost approx. 25% of my investments. Should I just let it ride?

Well, a lot depends on what you want to do:

When do you want to retire?
What are your retirement goals?
What other income will you have once you retire?
Do you, your spouse, or dependent kids have any medical conditions that would require additional money?Without knowing the answers to just those few questions, it's hard to say.

Assuming you have a decade or so, are okay with doing a bit less in retirement, have a few other income options, and no big medical issue, what you could do is:


Ride it out for the next year or so (when the recovery -- if there is one -- should start getting into gear).
Then increase your contributions if possible
Then readjust your allocations, putting a bit more in aggressive investments than you normally would at your age (when it should be primarily safe investments [80%], with a few moderate [15%] and aggressive [5%]. In your case, maybe set it at a 70/20/10, or even 70/15/15).Of course, if you planned on retiring in the next few years, want to travel all over the world, and have some serious health issues ... well ... it'll be tough to make up what you lost.

The key would be to stop the current bleeding and switch to a lot of "safe" (read: less volatile) investments such as bonds, CDs at a stable bank, etc.

MM
~~:shrug:

Silock
12-02-2008, 12:23 PM
That's what I'm doing, but it just feels crazy to sit here and watch it go down, down, down. Why not pull it out and put it in a mattress until it starts going back up?

If you were going to get out and into cash, it should have been a while ago. It seems we've been testing and re-testing the bottom over the past few couple of weeks. I'm not convinced it'll sit any lower than where it was last week.

jidar
12-02-2008, 12:26 PM
In May Gold was at an historical high of over $900/ounce

today it's still over $700 which is more than three times what it was in 2000

I'd say that getting into gold right now is probably too late.

Silock
12-02-2008, 12:28 PM
I don't think it's too late so long as you're not thinking of making huge profits off of it. If you're looking not to LOSE money, it's probably fairly safe, especially an ETF.

Mark M
12-02-2008, 12:28 PM
In May Gold was at an historical high of over $900/ounce

today it's still over $700 which is more than three times what it was in 2000

I'd say that getting into gold right now is probably too late.

Again, yes and no.

The odds of gold staying at the level it's been flirting with are slim. It's almost like the housing market -- the top has to be reached at some point, and then it'll fall.

But for a long-term investor, having a small amount in gold isn't a bad idea since it's one of those things people will always want, no matter the economic conditions.

MM
~~:)

Swanman
12-02-2008, 12:45 PM
That's what I'm doing, but it just feels crazy to sit here and watch it go down, down, down. Why not pull it out and put it in a mattress until it starts going back up?

If you get out now, you are locking in a loss. Then when the market goes back up and you feel comfortable buying in, you are buying at a more expensive price. Unless you have near-term liquidity needs, just leave it in there and let it come back up over time. It will, it always does, it just may take a period of a few years to completely recover.

Stewie
12-02-2008, 12:47 PM
In May Gold was at an historical high of over $900/ounce

today it's still over $700 which is more than three times what it was in 2000

I'd say that getting into gold right now is probably too late.

Unless you really understand the gold market, the scenario you describe is true but not how to look at things.

There are two huge things that are going on right now concerning the gold market.

1) The value of the US$ has risen because a huge number of dollar shorts are unwinding their trades to get cash. This is only short term. The dollar will resume it's bear trend in the first half of '09.

2) The Comex price of spot gold vs. the physical market it really skewed. Demand for physical hasn't waned yet the Comex price is around $800. That will work itself out in time and the Comex price will rise. The Comex only deals in 100 oz. denominations and it appears that people are starting to take delivery of the gold rather than cash settlements. The Comex only has about 21 million ounces of gold before they run out.

The rise in the price of gold is a sign there are huge problems in the US$ and in U.S. fiscal issues. Printing money ad nauseum is no way to defend a currency, but here we are.

If you think things are going to turn around soon and home prices will suddenly rebound to '06 levels and everyone can pay their mortgage and $20+ trillion worth of bad debt is going away, then by all means ignore gold.

bogey
12-02-2008, 01:05 PM
I'm in Vanguard Life Cycle Fund, 2020 retirement I think this is how it's allocated. Any thoughts?
Ranking
by
Percentage Fund Percentage
1 Vanguard Total Stock Market Index Fund Investor Shares 56.3%
2 Vanguard Total Bond Market Index Fund Investor Shares 29.4%
3 Vanguard European Stock Index Fund Investor Shares 7.8%
4 Vanguard Pacific Stock Index Fund Investor Shares 3.4%
5 Vanguard Emerging Markets Stock Index Fund Investor Shares 3.1%
Total 100.0%

Calcountry
12-02-2008, 01:08 PM
Ok, so the ecomnomy stinks. Everywhere you read there is talk about it getting worse before it gets better. The real optimists think by 2010 we will be turning things around and the real pessimists talk about hyperinflation, the great depression, and the complete colapse of the dollar. I am probably somewhere in the middle, but I really dont know about economics. So, is it wise to start looking at gold as part of ones portfolio? If so, how much by percent? Do any of you buy gold, and if so, how and where?Middle of the road? That is where you go to be run over.

Gold? bought that 8 years ago should be about 10 % of your holdings at all times.

Cash? Sold all my stock the Wednesday before the second vote on the 700 billion and am damn glad I did.

If you are still in the market, you are screwed plain and simple. If Obama can figure out a way to tax your losses, he will.

Excessive government intervention in careless and reckless pork barrel, boondoggle fashions will lead to inevitable malaise for years. The "New Deal" didn't get us out of the last depression WWII did. New Deal II sure as heck won't get us out of this downturn( I am not willing to admit it will even be a Depression yet) either.

When people no longer give a damn, and find it highly unusual for people who are in distress to discard their animals, then we are in a depression. But as long as we have snooty high falutin ladies who feel those "assholes" who just dumped the dog "ought to be this and ought to be that", then times are good.

Did she ever consider, that the dog may have just ran away, and was too damn stupid to find its way home? Perhaps it deserved its fate for being so damned stupid?

I dunno, anyway, plenty of dog food still going out my door.

Skip Towne
12-02-2008, 09:42 PM
I havent watched the silver market recently but I used to buy silver eagle coins. I had one of those green plastic boxes from the US Mint full of them when my house burned down. After the fire I dug the melted ball of metal out of the ashes and took it to the bank. They gave me $700 for it. Silver is really hard to destroy.

jjchieffan
12-02-2008, 10:20 PM
I remember playing the investment game a few years back. It was when Microsoft was freefalling. It had peaked around $140. I bought it at $65. It continued to drop to below $50, then climbed back up to $69. I sold then and haven't tried speculating since. I did get out at the right time though, becuase after I sold, Microsoft continued to fall, and I don't think it has hit any where near $69 a share since.

Fat Elvis
12-03-2008, 01:04 PM
The key would be to stop the current bleeding and switch to a lot of "safe" (read: less volatile) investments such as bonds, CDs at a stable bank, etc.

MM
~~:shrug:

The dividend yeild on a lot of equities now far outpaces what you can get for bonds or CDs. Even if stock prices go down more (likely), your dividend yield will provide more of a return than a lot of traditional "safe" investments. Once the economy starts to recover, the high yiedling dividend equities will more than likely be bouyed by the market.

googlegoogle
12-15-2008, 01:38 AM
read this today. 12% if you want to take the chance.

http://abcnews.go.com/Business/Story?id=4549802&page=2

Walmart,procter gamble, cigarette maker....forgot the name of the stock.

BWillie
12-15-2008, 01:56 AM
read this today. 12% if you want to take the chance.

http://abcnews.go.com/Business/Story?id=4549802&page=2

Walmart,procter gamble, cigarette maker....forgot the name of the stock.

What does the lending club do if someone defaults on their loan? Especially if they have no real property or collateral. I guess I don't understand why only less than 1% of the loans are defaulting with these people of horrible credit scores