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Should You Buy Gold as an Investment or as Insurance?

Jul 16, 2008
As an investor, you should always know what your objectives are. One of the biggest traps investors fall into is buying a gold position that has little or no relationship to his or her objectives. Gold is not for everyone. Buying gold is usually used as an insurance policy in case other investments such as stocks go down.

Gold is in a bull market right now because its core fundamentals are so outstanding. It is also doing well because the stock market is tanking. You see, that is the "insurance" part of gold. When stocks go down, gold often goes up. A position in gold will often offset your losses in the stock market in troubled times.

The price of gold may jump up to thousands of dollars per ounce in the current rally or it may struggle and fall lower. No one knows for sure even if they pretend to. One thing is for sure: if the stock market continues to fall, things will look good for the gold investor. Gold is the ultimate alternative investment because it is tangible.

Many people, including the die hard stock investors, often still see gold as the most undervalued asset group in a standard portfolio mix. In general, gold becomes more desirable in times of banking failures and tough economic times. Also, like all investments, gold becomes more attractive to more people the higher it goes. People don't seem to want to miss out and that is why both gold and stocks tend to go up too high before they fall back.

Before you invest in gold, you should carefully consider what percentage of your overall portfolio you wish to risk in gold-related investments. If you are thinking about investing in gold, it is worth giving the same consideration to your purchase as you would to any other investment. When you buy gold investments, you lower risk in your investment portfolio.

As more investors realize that gold is a great way to profit in today's uncertain climate, more fund-makers have been happy to supply the means with which to buy gold. There is a whole world of excellent alternatives out there for investors who wish to invest in gold. Just be sure you understand what your gold objectives are before you allocate too much of your portfolio towards it. Gold can be a great addition to any portfolio but only in the right amounts. Putting too much of your net worth into gold would be the same as gambling.
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