As from April 2013 my Journey in Investing is to create Retirement Income for Life till 80 years old for two over market cycles of Bull and Bear.

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Saturday, 3 September 2011

Buy Gold/Silver as insurance or hedge against inflation? (2)

Read? Buy Gold/Silver as insurance or hedge against inflation?

The only Gold that I have is my wedding Gold ring I am wearing.

Wait till I become multi-millionaire, then I will think about it of hedging tool.

Gold itself doesn't pay dividends and can't grow by itself. You really need a greater fool to come along to buy it higher. Unlike investing in stocks, it is the job of CEOs and their Boards to grow the company horizontally and/or vertically. Whether they can successfully achieve it or not is another story.

For example, look at our home grown companies like DBS, Keppel Corp, Semb Corp, ST Engineering, SingTel, etc growing so big and so large that you don't need greater fools to come along to buy it higher. Get it?

See how Keppel Corp grows itself and now it is growing its third wing - Infrastructure.

From its humble beginnings as a local ship repair yard, the Keppel Group has become one of the largest conglomerates in Singapore. Over the years, the Company has evolved into the current structure of focusing on three key businesses in Offshore & Marine, Infrastructure and Property.

From one local shipyard in Singapore to 20 yards globally.

Can Gold Bar grow?


3 comments:

  1. You have to realise that gold and silver are actually two of the oldest forms of money, money that we cannot print as and when we want and in whatever quantities we want.

    You also have to realise that both metals have utility and, therefore, value. This case is stronger for silver than gold.

    Just like any other assets, if there is demand and if supply is limited, price will go up.

    For equities, it would be the same. If there is strong demand and since the number of shares at any one time is limited, we could see price going up.

    Are not people who buy at higher prices greater fools especially if valuation is no longer cheap?

    There are very few things in this world that are not amenable to the "Greater Fool" idea although I have always disliked the condescending tone of the phrase.

    If you are simply saying gold and silver do not generate cash flow, then, there is no argument there. You are right. However, is that enough reason not to invest in them?

    ReplyDelete
  2. I don't think you get it exactly right for equities.

    Stock price of equities can rise from both speculation i.e. supply and demand; and from growth of companies either horizontally and/or vertically. Gold can never grow and no matter what.

    ReplyDelete
  3. I see your blog post has grown 4 more paragraphs since I made my last comment. ;)

    I understand what you are trying to say. By the same token, I can also say that companies could shrink and even go under.

    Now, gold cannot grow physically. By the same token, can gold shrink or go under? ;)

    We have to recognise that gold and silver have a place in one's investment portfolio, just like equities and bonds. At different times, being in one or the other could be a better move.

    Do you believe me if I were to say that there would come a time when it would be better to be invested in bonds than equities?

    ReplyDelete

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