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Facts About Gold Investing 2016

April 13, 2016
Gold Investing  - If you looked at what the price of gold has done over the the last three years, you could not be blamed for thinking that it would take a brave or foolish investor to consider putting any money into this precious metal.

Many financial advisors and seasoned investors advocate having a portion of your portfolio in gold. While stocks can rise quickly to bring high profits, gold acts more as insurance to protect your investments during a downturn in the market when those same stocks tumble.

Gold has always been viewed as a decent hedge when stock market investors start to get nervous about a string of gloomy economic forecasts and unexpected events. The beginning of 2016 has been a chastening experience for many investors with trillions shaved off valuations, triggered by events in China and a general backdrop of political and economic uncertainty for the year ahead.
Market conditions

Having set the scene for the coming year and painted a picture of fluctuating valuations and market volatility, it is also necessary to understand what is going on in the gold-mining industry and how it has reacted to falling demand and prices.

With the usual caveat that the following funds are just suggestions and not investment advice, based on a strategy for those considering how to invest in gold in 2016, here are some investment funds that you may wish to look at.

1.    Buying gold isn’t necessarily an investment for getting great returns. The price fluctuates during good and bad economic times, but always maintains some value, according to Bank Bazaar.

The main goal of having gold in your financial portfolio is for security during inflation and protection when the stock market declines.

2. First Eagle Gold Fund Class C

The average return in the last five years of -18.72% is hardly likely to have you salivating at the prospect of making a big return on your investment, but this fund has done better than plenty and if you believe that the tide has turned for gold, the fund offers a good spread of stocks and physical bullion.

The fund includes a portfolio of gold-mining finance companies and operating firms who have a spread of long and short-term gold mines. A little over 20% of the fund’s assets are physical gold and silver bullion and it claims to be very cautious in its considerations of capital, operational and geopolitical risks associated with investing in gold directly and also gold-related securities.

3. Gold mutual funds. For people who are hesitant to invest in physical gold, but still desire some exposure to the precious metal, gold mutual funds provide a helpful alternative. These funds hold portfolios of gold stocks-that is, the stocks of companies like Newmont Mining that mine for gold. Newmont is an example of a senior gold stock. A senior is a large, well-capitalized company that has been around several years and has a profitable track record. They tend to own established mines that produce known quantities of gold each year. For many investors, selection of such a company is a more moderate or conservative play (versus picking up cheap shares in fairly young companies).

4.  Junior gold stocks. This level of stock is more speculative. Junior stocks are less likely to own productive mines, and may be exploration plays-with higher potential profits but also with greater risk of loss. Capitalization is likely to be smaller than capitalization of the senior gold stocks. This range of investments is for investors whose risk tolerance is broader, and who accept the possibility of gold-based losses in exchange for the potential for triple-digit gains.

Gold mutual funds are an alternative option for investors who are reluctant to put their money directly into physical gold and represent a slightly more conservative approach than some other ways of investing in gold such as gold exchange-traded funds or junior gold stocks, which is definitely a boom or bust option, and can result in potential triple-digit gains or losses if exploration plays don’t reap positive rewards.

We cannot know, predict, or even guess, when the demise of the dollar is going to occur, or how quickly it will take place. But we do know it is going to occur. The tragic mismanagement of monetary policy by the Fed over many years has made this inevitable.

Every danger to one group of people is invariably an opportunity to another. It all depends on where you position yourself. Those investors positioned in dollar-based investments are going to suffer the loss of purchasing power when the dollar’s value disappears. Those who have moved their investments to higher ground will benefit from the change.

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