Add the Midas Touch to Your Portfolio

It only takes a quick look at the paper, or flipping on the radio to TV to figure out that we’re in some economic dark times. With the housing meltdown, massive unemployment, and bailouts of all kinds it’s no secret that we have seen better days. With the worse economy since the Great Depression, stocks have suffered horribly. The S&P 500 was down 35% in 2008 and has seen another 15% drop in 2009 so far.

With investors seeing their returns vanish and their principle disappear a lot of people are investing in gold to stay off the ill effects of the economy.

So why should investing in gold be part of your money strategy?

1. Gold retains its value: Gold prices may rise and fall but it will always be worth something. Stocks can go to zero.
2. Weakness of U.S. dollar: When the U.S. dollar is weak compared to other currencies, many investors turn to the safety of gold. With trillions of dollars being put into the economic system by the Fed, the dollar has fallen sharply recently. With a dollar literally not worth what was worth yesterday gold is great way to maintain wealth.
3. Hedge against inflation: With the cost of goods and services going up faster than our currency gold can be a good way to increase purchasing power.
4. Decreasing supply: Gold must be physically dug out of the ground and refined, and there is only a limited amount available. Additionally, mining outputs have decreased in the last couple of years. Lower supply means higher prices
5. Increasing demand: As emerging markets begin to prosper and the world’s middle class grows the demand for luxuries such as gold jewelry increases. More demand means higher prices.
6. Diversification: Gold, in one form or another, will offset currency or stock loses in a portfolio. It can greatly help curb volatility and risk in any portfolio.

Investing in gold is great, right? So, how does the average investor incorporate it into their portfolio?

You can gain exposure to gold in your portfolio in many ways.

1. Physical gold: Gold can be purchased from banks or dealers in coin or bar form.
2. Gold Futures: Like any other commodity, contracts for purchase at a set price in the future can be added to your portfolio. These futures can be bought and sold just like stocks. However, trading in futures can be risky so please be careful.
3. Gold company stocks: You can purchase the stocks of companies that mine, refine and trade gold. Their stock prices will usually follow the price of gold.
4. Gold ETfs: Exchange Traded Funds track a commodity, group of companies or index of stocks. By buying gold ETF you will have instant access to gold in your portfolio.

In these uncertain times, when nothing seems to be working, investing in gold can minimize your exposure to inflation, reduce risk, help quell volatility and maybe even make you a little money! Give it a try.