Becoming Rich by Investing in Gold
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Making money from the stock market requires a lot of patience. People who invest in the stock market are all too familiar with the sinking feeling in their stomachs when they wake up to the news that it is once again crashing.
Because the health of the stock market depends on a hundred different factors there’s always a level of uncertainty involved; even the most knowledgeable investors can’t guarantee what’s going to happen.
Investors don’t like hearing that major Wall Street bank has shut down and that their 401(k) continues to lose value.
The Impact of Financial Disasters
Everyone remembers the 2008 financial crisis and how their lives changed overnight. Today, talks about another financial disaster are surfacing and many investors worry that 2008 may happen again. These fears stop many from putting money in the stock market.
So, what’s the alternative?
Noted investor Seth Karlman has stated that the low interests of the Federal Reserve have caused a distortion in the financial market. Also, the spending on the defense budget, wars, and welfare programs take a toll on the economy.
The financial experts that are predicting another financial crisis and a collapse in the US dollar are also expecting the price of gold to go up. Instead of putting all your money into stocks, it’s better to invest in gold as insurance in case the stock market gets shaky.
Investing in Gold to Cushion the Blow
Investing in gold is an excellent way to cushion the blow of a financial crisis.
Consider the following example. You have a $100,000 portfolio, where 95% is made up of stocks and 5% is made up of gold; $95,000 worth of stocks and $5,000 worth of gold. If a recession doesn’t happen, your stocks will remain stable and the price of gold may go up or down by a negligible amount.
However, if a financial crisis does happen, the price of gold will shoot up and you can have $7,000 in hand. When the stock market is down, the value of your stocks can decrease to a mere 50%; but because the value of gold will increase, your loss would be limited. In some cases, the gold you own can actually generate net gain.
How Much Should You Invest In Gold?
To determine the amount you should invest in gold, you need to look at the financial markets. What are the chances of a financial crisis?
If the market looks healthy, then at least 1-5% of your portfolio should consist of investments in gold. When the chances of a financial crisis are high then consider a gold investment up to 20%.
The ongoing US-China trade war, the uncertainty of Brexit, along with the nervousness about Germany’s economy, are all warning signs of a potential financial crisis.