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Gold as an investment tool – Questions Answered

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Since 2008, the stock markets have been in a haphazard state of fluctuation. At times it has been a steep decline (2008) and at others, a steady incline full of promise (2010). Just weeks ago, in August 2011, together we saw the stock markets plunge and our retirement flaunt wildly with demise.

Before going further, I will explain that I am not an investment advisor. I have over 10 years experience as an international tax preparation firm, and hold an MBA. I have experience working in an accounting firm and as a financial advisor, but am in no way representing myself as such for the purposes of this article. This is not a promise of gain - just a simple warning to be wary and as knowledgeable as possible in your investment affairs. I later talk about gold dealers, and am fortunate enough to have exposure to them since I was a tyke. My parents had a gold, coins and bullion business that lasted for decades until their ultimate demise as a couple. What I learned through them, their friends and enemies has been priceless.

Gold has long held the value of money for centuries. It was, in fact, the original form of currency and was widely used as such. This is currently known as the “gold standard”. After many years having passed, gold has still retained its value and has clearly showed an increase. But how the heck does gold fair as an investment? When will it pay back? Where and how to I get some gold for myself?

In a volatile economy, gold is a good investment. It is stable and almost always retains its value. It won’t pay you dividends, but it won’t be risky either. I consider it to be a retirement fund of sorts.

Gold is slow. Only recently has it had an upswing, but over the last 20 years, it has been gradual and slow. Gold typically fluctuates in the opposite direction of oil, though not quite as violently. If you buy gold, hold it for a couple decades before you cash out. It is a strong investment, like a house, as it does nothing for you but bring a smile to your face for your ownership of it.

This brings me to yet another common question: How do I become an owner of gold? Where and from whom do I buy? Gold is expensive at the moment. If you purchase now, August 2011, you will be buying at the top of the market. (But then again, who is to say it won’t skyrocket from here?) You can buy gold from the bank or dealers. In Canada, Scotia Bank is the main place to buy gold. Walk in, drop $1800 in the lap of a trader, they make some calls, you wait and before you know it – you have bought gold on paper. The physical gold gets to the bank within a week or two, you pick it up and put it away in a safe place – like a safety deposit box.
If you don’t want to deal with a bank, and you’re willing to pay a premium, you can buy the same gold at any dealer around your town. They can be a smarmy bunch, so beware. Know that all prices are negotiable and there is competition between every dealer – and every dealer knows every dealer and every dealer wants the same consumer (hence the smarmy comment).

I stick with the bank. You get what you’re asking for, you don’t pay the premium of a dealer, and really – you’re sitting on it for a couple decades so what should it matter, right?

Be wary of your financial portfolio. Warren Buffet (http://en.wikipedia.org/wiki/Warren_Buffett) subscribes to his mantra of a 30-30-30 plan for retirement. That is, a sound portfolio will be made up of 30% real estate - 30% high risk investments (stock) - 30% medium risk investment (dividend paying blue-chip stock), That was a great idea until he felt the shudder of the stock market as well.

Gold is a sound investment to carry you over the long term. It doesn't fluctuate wildly (gold stock does. gold metal does not) and is thought to be a worthwhile place to park your savings during tumultuous times.

Of course, this is my opinion and you are encouraged to seek professional financial advice before committing to any investment.
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