Saturday, 20 April 2013
Buy Gold/Silver as insurance or hedge against inflation? (5)
Read? Buy Gold/Silver as insurance or hedge against inflation? (4)
Borrow the idea from La Papillion
** "BIAS" is a special feature in my blog where I get to say whatever I want with scant regards for your feelings. I'm not politically correct in this feature, so go ahead, judge me."
Uncle8888 is going to do another BIAS post!
This time is about Gold as Insurance for small retail investors!
If you are one of Gold Lovers; you may want to stop reading further.
Later, you "tulang" at your own risk if you choose to continue ....
Gold as Insurance means paying premiums for protection
Gold is without yield
That missing yield is the cost of premiums paid for using Gold as protection against future inflation and/or government printing more and more worth less paper currencies.
Common folks understanding is that Gold as hard assets will be able to retain at least its base value across market and economic cycles.
Cost of Protection
Here is the truth from Uncle8888!
You may not like to hear from Uncle8888 telling you the truth and fact.
How savvy are you as retail investors in investing your own money?
Can you make at least 10% yield on your investment?
If you can make 10% yield, your cost for using Gold as protection is 10% premium.
If you are dumbest retail investors, your cost of protection is the lowest.
Smartest retail investors will be paying the highest cost for protection!
Silly right???
Why Warren Buffet no like Gold?
Got the answer???
To be continued soon ....
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Hi Uncle888,
ReplyDeleteI have been silly also to listen to others and invest in UOB silver account. Been in the red since silver and gold go downtrend. No yield from silver. Stocks at least bring some yield.
CW,
ReplyDeleteYou har!
But then, you gave advance notice; so it's fair.
For someone who bought Keppel from Jan-Mar 2013, if the stock corrects 20%, he/she will be feeling pain and regret for listening to someone we know ;)
But for someone sitting on a 10 bagger unrealised gain, it's not even a scratch!
Similarly, for those astute buyers of gold below USD800, steady as she goes.
It's like comparing those who bought dividend stocks in 2009 with those who bought in 2012 - the yields and margin of safety are not the same.
Or we can ask those who invested in REITs and dividend stocks prior to 2009 how well they slept with their "yields" when nursing 50% capital loss during 2009?
Majority of stocks don't pay dividends.
Property if not rented out has no yield too (negative cash flow some more!) You flat and my flat have done not bad despite negative yield no? LOL!
Yield is not the issue.
It's all about buying low and selling high.
There is absolutely nothing wrong speculating or trading Gold for trading gains or losses.
DeleteBut, to advocate Gold as Insurance for protection with no Exit Plan in mind for SMALL retail investors with LIMITED capital will need second level thinking.
:-)
CW,
DeleteLOL!
OK, OK.
Most older small retail investors would have "enough" insurance on their bodies - gold watch, gold chains, gold rings, etc - too much "insurance" would be overkill ;)
I think buying and keeping a little gold is for insurance when you really need it for "emergency use - like in time of war, hyper inflation, need to avoid the "Loan shark, you need to run-road, etc. But of course like buying term or life insurance, you hope you never need to use it.
ReplyDeleteIf you buy to speculate or invest, then i think i would prefer equities. Like WB said.
Investors normally invest in gold as a form of hedge in their portfolio. The idea is to reduce volatility during market crisis. If people is thinking of making quick returns and become rich from gold investments, then they have the wrong mentality and should not even touch gold.
ReplyDelete