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Gold or Equities?

Bullionstar

Bullionstar

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Recent market swings for penny stocks would make investors pause and rethink their approach on equities. Quite a number of investors lost their savings investing in risky penny counters. Some retirees even lost a huge chunk of their retirement funds. So the question for most investors is gold or equities?

Whilst I certainly won’t dispute the pros on investing in equities, I do believe in having a portfolio consisting of several investment instruments. And I believe that every investors should hold bullion in their investment portfolio. This is because gold prices often move in opposite direction to equities and currencies. So allocating gold in your portfolio can help to serve as a form of hedge against inflation and enhance your portfolio’s performance.

Gold and Silver Bullion

Investors should hold a long-term view on gold investments and not expect quick returns. They should consider it as a form of diversification to lower risk for their investment portfolio. Very often, I read articles from many writers in The Finance.sg sharing their investment experiences. Many of them pumped in hundred of thousands of dollars on shares, REITs and ETF. Their investment performances were impressive indeed but if the stock market plunged suddenly, large portions of their investment values would be wiped off overnight.

How many of these investors can stomach such market swings? That I don’t know but all I know is that every portfolio must be balanced and focusing too much on stocks in your asset allocation is not healthy at all.

It is important to differentiate between paper gold and physical gold. The former refers to ETFs, shares in mining companies or options and futures. These financial instruments are more suitable for speculators who wish to have faster returns. There are of course risks involved for paper gold. Physical gold refers to bullion, in the form of gold and coins. When we refer to “investment”, you give up part of your wealth in exchange for the possibility of returns. So strictly speaking, bullion is not an investment per se because it is money and should be seen as stores of wealth, rather than a trading vehicle.

I hope that more Singaporeans would adopt a holistic approach in managing their personal finances. If we are genuinely focused in building our wealth over the long run, it is important to have a portfolio which include bullion. Putting all your monies in equities and hoping to seek fast returns is not the right way to go for a novice investor.

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3 Comments

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  1. Hi Gerald

    How much allocation in the Bullion do you recommend for someone below the age of 30 and 40?

  2. For Gold as hedge; it is not age. It is your size of your net worth that counts. Right?

  3. I feel that for 30-40 age group, there should be bullion allocation of 20% in their portfolio.

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