Investing in gold

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rebfor
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Investing in gold

Post by rebfor » Mon Feb 11, 2019 2:08 pm

I'm a novice investor and so far have just been investing in Vanguard total stock and bond funds.

What are people's thoughts about investing a small percentage of my investments in gold? Where and how would I go about doing this?

Thanks in advance.

Thesaints
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Re: Investing in gold

Post by Thesaints » Mon Feb 11, 2019 2:10 pm

Why would you want to invest in gold ?
Why not silver, or palladium, or FCOJ ?

In general commodities are best left alone. They do not add anything to an individual retail investor's portfolio.

Topic Author
rebfor
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Re: Investing in gold

Post by rebfor » Mon Feb 11, 2019 2:11 pm

My thought was just to add some diversification. Curious of others have done this or if it's a generally bad idea.

stuper1
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Re: Investing in gold

Post by stuper1 » Mon Feb 11, 2019 2:12 pm

For a contrary view, here's a podcast that was recommended to me:

https://etfstore.com/?powerpress_pinw=7334-podcast

Halicar
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Re: Investing in gold

Post by Halicar » Mon Feb 11, 2019 2:13 pm

This has been debated ad infinitum here. Use the search feature and you'll find plenty of threads.

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Wiggums
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Re: Investing in gold

Post by Wiggums » Mon Feb 11, 2019 2:15 pm

Halicar wrote:
Mon Feb 11, 2019 2:13 pm
This has been debated ad infinitum here. Use the search feature and you'll find plenty of threads.
+1

Thesaints
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Re: Investing in gold

Post by Thesaints » Mon Feb 11, 2019 2:20 pm

rebfor wrote:
Mon Feb 11, 2019 2:11 pm
My thought was just to add some diversification. Curious of others have done this or if it's a generally bad idea.
How about Savings Bonds ?

Gold has an expected return not much higher than inflation. A very high volatility, which is not as many believe inversely correlated to traditional financial markets volatility, nor to inflation. Its high trading cost also does not help.

DB2
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Re: Investing in gold

Post by DB2 » Mon Feb 11, 2019 4:44 pm

"Wall Street firm says there is now a 'strong case' for gold over bonds, stocks"

https://www.cnbc.com/2019/02/11/-bernst ... s-now.html

Thesaints
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Re: Investing in gold

Post by Thesaints » Mon Feb 11, 2019 5:13 pm

There are so many firms that is is quite easy to find at least one who supports buying whatever you like.

totesmagotes
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Re: Investing in gold

Post by totesmagotes » Mon Feb 11, 2019 5:29 pm

Thesaints wrote:
Mon Feb 11, 2019 5:13 pm
There are so many firms that is is quite easy to find at least one who supports buying whatever you like.
Indeed there pretty much have to be firms or investors who supporting buying X, for if there were only sellers, then the price would go to $0. For every seller, there is a buyer. Sometimes buyers aren't ready to meet sellers until the price is much lower, though, just as there are times when there aren't sellers to meet the buyers until the price is much higher.

There is a wide enough range of thoughts that I'm sure someone can find someone else who thinks X is a good buy or a terrible buy. That's what makes these sorts of articles about "X will go to $Y, according to one research firm" worthless. That's not to say that the market is always efficient, of course. Sometimes the sellers misjudge what the future demand will be for their stocks/assets and hold out for a price than what buyers in the future will offer.

dbr
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Re: Investing in gold

Post by dbr » Mon Feb 11, 2019 5:36 pm

You can read a few thousand posts on Bogleheads here: https://www.google.com/search?sitesearc ... org&q=gold

I wouldn't even attempt to summarize a conclusion. Probably in those posts you can find about every point of view that can be imagined.

OK, maybe the baseline view is that there is no point in investing in gold and it should be avoided. Lots of people hold some gold anyway, for whatever reasons. A good fraction of the discussion will be wandering debates about what to do when the apocalypse arrives.

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willthrill81
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Re: Investing in gold

Post by willthrill81 » Mon Feb 11, 2019 5:37 pm

rebfor wrote:
Mon Feb 11, 2019 2:08 pm
I'm a novice investor and so far have just been investing in Vanguard total stock and bond funds.

What are people's thoughts about investing a small percentage of my investments in gold? Where and how would I go about doing this?

Thanks in advance.
Gold has historically been a very poor investment. From 1980 until now, it hasn't even kept pace with inflation.

We hold a relatively small amount of physical gold as a insurance against the unknown.

If you want gold in your portfolio, buy GLD. If you want gold in your possession (far better IMHO), then buy from a reputable online dealer.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

ColoradoRick
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Re: Investing in gold

Post by ColoradoRick » Mon Feb 11, 2019 6:31 pm

rebfor - in the past I have had up to 5% in gold. If that helps you sleep better at night then go for it. I decided to liquidate mine when we had multiple reductions in force at work and gold was higher than equities and I wanted to raise some cash in case I got laid off. Gold is basically a bet on fear, that things will get worse. It is a non-productive asset. But if you'd like the diversification, and keep it under 5% I can't say anything bad against it.

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Re: Investing in gold

Post by z3r0c00l » Mon Feb 11, 2019 7:02 pm

"I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today's market prices about $7 trillion – that's probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold all day, and you know, me touching it and fondling it occasionally…Call me crazy, but I'll take the farmland and the Exxon Mobils." -The most famous and successful investor alive today.

It is possible that speculation on gold could pay off. However that has not proven true most of the time. I wouldn't bet even a dollar on it, personally. If I had gold today (and as a treasure hunter, I often do have some gold and silver) I would sell it.

Thesaints
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Re: Investing in gold

Post by Thesaints » Mon Feb 11, 2019 8:01 pm

ColoradoRick wrote:
Mon Feb 11, 2019 6:31 pm
Gold is basically a bet on fear, that things will get worse.
Not even that, unfortunately. Gold prices plunged during the European sovereign debt crisis. I'll give this to gold, that it is not much correlated to anything, except interest rates (inversely).

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Taylor Larimore
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Re: Investing in gold

Post by Taylor Larimore » Mon Feb 11, 2019 8:09 pm

rebfor wrote:
Mon Feb 11, 2019 2:08 pm
I'm a novice investor and so far have just been investing in Vanguard total stock and bond funds.

What are people's thoughts about investing a small percentage of my investments in gold? Where and how would I go about doing this?

Thanks in advance.
rebfor:

Mr. Bogle gave his ideas about investing in gold in this video.

https://www.youtube.com/watch?v=KlhT07G8zGs

When in doubt, I listen to Jack.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

pdavi21
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Re: Investing in gold

Post by pdavi21 » Mon Feb 11, 2019 8:11 pm

The time to buy gold was when Vanguard dumped 1 billion in precious metal miners and gold in late September. :oops:

cdu7
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Re: Investing in gold

Post by cdu7 » Mon Feb 11, 2019 8:11 pm

rebfor wrote:
Mon Feb 11, 2019 2:08 pm
I'm a novice investor and so far have just been investing in Vanguard total stock and bond funds.

What are people's thoughts about investing a small percentage of my investments in gold? Where and how would I go about doing this?

Thanks in advance.
No

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willthrill81
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Re: Investing in gold

Post by willthrill81 » Mon Feb 11, 2019 8:11 pm

Taylor Larimore wrote:
Mon Feb 11, 2019 8:09 pm
rebfor wrote:
Mon Feb 11, 2019 2:08 pm
I'm a novice investor and so far have just been investing in Vanguard total stock and bond funds.

What are people's thoughts about investing a small percentage of my investments in gold? Where and how would I go about doing this?

Thanks in advance.
rebfor:

Mr. Bogle gave his ideas about investing in gold in this video.

https://www.youtube.com/watch?v=KlhT07G8zGs

When in doubt, I listen to Jack.

Best wishes.
Taylor
There was at least one interview where Bogle recommended a 5% allocation to gold.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

staythecourse
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Re: Investing in gold

Post by staythecourse » Mon Feb 11, 2019 9:19 pm

willthrill81 wrote:
Mon Feb 11, 2019 8:11 pm
Taylor Larimore wrote:
Mon Feb 11, 2019 8:09 pm
rebfor wrote:
Mon Feb 11, 2019 2:08 pm
I'm a novice investor and so far have just been investing in Vanguard total stock and bond funds.

What are people's thoughts about investing a small percentage of my investments in gold? Where and how would I go about doing this?

Thanks in advance.
rebfor:

Mr. Bogle gave his ideas about investing in gold in this video.

https://www.youtube.com/watch?v=KlhT07G8zGs

When in doubt, I listen to Jack.

Best wishes.
Taylor
There was at least one interview where Bogle recommended a 5% allocation to gold.
Correct. This was discussed just recent (last 1-2 months). In the end, it is human nature to take the information one wants to hear and ignore the information one does NOT want to hear. We are all guilty of it.

For the OP, my general opinion on asset allocation is unless you are willing to make a significant allocation who cares? 5% this way or that is not going to move the needle. At LEAST 10%, preferable would be 20% allocations to really see a substantial effect of adding x, y, or z to your portfolio will start shaping its short and long term characteristics. If you are not going to do that then why even waste time thinking about it.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

Caduceus
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Re: Investing in gold

Post by Caduceus » Mon Feb 11, 2019 11:43 pm

Gold isn't a productive asset. Its only potential utility in an investment portfolio is that it might be un-correlated to movements elsewhere in the stock market. It might do well when the stock market is tanking (or it might not). But the price you pay for what is essentially a lottery ticket is fairly high, since it's not producing or doing anything in the meantime. Companies produce profits. Gold just sits there.

I would forget about it.

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Peter Foley
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Re: Investing in gold

Post by Peter Foley » Tue Feb 12, 2019 12:04 am

While I do not favor it myself, there are some who do for diversification purposes. If you are inclined to go this route read about Harry Browne's Permanent Portfolio.

ShadesOutWest
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Re: Investing in gold

Post by ShadesOutWest » Tue Feb 12, 2019 12:47 am

I have 3% of assets in GLD. Here is year by year return for GLD. Since 2005, when this ETF started, it has returned 6.15% per year.

GLD Gold

2018 -1.54% $277,030
2017 11.41% $281,363
2016 8.69% $252,547
2015 -11.78% $232,355
2014 -0.58% $263,382
2013 -28.09% $264,918
2012 5.26% $368,403
2011 11.20% $349,993
2010 27.25% $314,742
2009 27.12% $247,341
2008 2.99% $194,374
2007 31.07% $188,731
2006 23.44% $143,993
2005 16.65% $116,650
2004 0.00% $100,000
2003 0.00% $100,000
2002 0.00% $100,000
2001 0.00% $100,000
2000 0.00% $100,000
1999 0.00% $100,000

Initial Investment $100,000

Avg Return per year 6.15%

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abuss368
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Re: Investing in gold

Post by abuss368 » Tue Feb 12, 2019 11:29 am

rebfor wrote:
Mon Feb 11, 2019 2:08 pm
I'm a novice investor and so far have just been investing in Vanguard total stock and bond funds.

What are people's thoughts about investing a small percentage of my investments in gold? Where and how would I go about doing this?

Thanks in advance.
Welcome to the Bogleheads!

I do not invest in gold although years ago during my earlier stock picking days we speculated in GLD. Many investment experts who I hold in high regard, such as Jack Bogle, David Swensen, and Warren Buffett, recommend to avoid speculating in gold. There are no earnings. One is simply buying a rock and hoping at some point in the future they can find a fool who will buy it at a higher price.

You will be so much better off with your portfolio of Vanguard Total Stock and Total Bond. Follow Jack's words and "stay the course"!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

pward
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Re: Investing in gold

Post by pward » Tue Feb 12, 2019 11:43 am

Gold is a great diversifier, about the only one that is truly uncorrelated with both stocks and bonds. Gold marches to the beat of it's own drum, and is a great flak jacket for when things get scary. Including a gold allocation can greatly reduce the standard deviation and increase the risk adjusted returns of your portfolio. Only buy gold if you're going to rebalance regularly though, as you want to be in a position where you're buying low and selling high. This negates the popular argument here that gold doesn't pay a yield or appreciate beyond inflation long term as the volatility of gold will give you plenty of opportunities to buy low and then take profits when the price spikes. You're not buying and holding, you're buying and rebalancing. Gold is also a great asset to hold in taxable accounts as it does not pay any yield, and the only time you get taxed is when you actually sell and realize capitol gains (although, gold does not have the long term capitol gains preferential treatment that stocks do, so you're aware).

I will echo a previous comment here as well that if you're going to add a gold allocation to get proper diversification benefits you should look in at least the 10-20% range. Anything below that is not going to do it's job when you need it to. The best way to buy gold is to buy physical 1 oz gold coins. If you don't want the hassle and safety, a low fee gold ETF like IAU or SGOL would be fine. Personally, I prefer to keep both physical and and ETF's and I use the ETF's to rebalance so I don't ever have to sell physical coins.

This is a very popular and great performing allocation including gold here if you want to look at an example portfolio. This allocations greatest loss was only 11% back in 2008, at a time when most other portfolios lost 30-50%. It also has an average yearly return comparable to a 60/40 (9-10% before inflation, 6-7% real) with much less volatility: https://portfoliocharts.com/portfolio/golden-butterfly/

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willthrill81
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Re: Investing in gold

Post by willthrill81 » Tue Feb 12, 2019 12:59 pm

abuss368 wrote:
Tue Feb 12, 2019 11:29 am
Many investment experts who I hold in high regard, such as Jack Bogle, David Swensen, and Warren Buffett, recommend to avoid speculating in gold.
Remember that Bogle recommended a 5% allocation to gold.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Investing in gold

Post by bearcub » Tue Feb 12, 2019 1:22 pm

Before findings Bogleheads, I had two Merk Funds invested in IRAs. One was a gold fund + the other a currency fund. They did well for the time I held them. No skill on my part, just luck. I transfered everything to Vanguard, Got out of those funds + into Vanguard funds. Not recommending them. Just saying what I did many years ago.

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abuss368
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Re: Investing in gold

Post by abuss368 » Tue Feb 12, 2019 2:10 pm

willthrill81 wrote:
Tue Feb 12, 2019 12:59 pm
abuss368 wrote:
Tue Feb 12, 2019 11:29 am
Many investment experts who I hold in high regard, such as Jack Bogle, David Swensen, and Warren Buffett, recommend to avoid speculating in gold.
Remember that Bogle recommended a 5% allocation to gold.
Interesting. I checked the portfolio examples in "Bogle on Mutual Funds" but did not see that. Do you have a source or interview?
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

GRP
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Re: Investing in gold

Post by GRP » Tue Feb 12, 2019 3:03 pm

5 to 10% in gold.

Every investor should have that. Just do it.

3funder
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Re: Investing in gold

Post by 3funder » Tue Feb 12, 2019 3:15 pm

No. Just no.

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willthrill81
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Re: Investing in gold

Post by willthrill81 » Tue Feb 12, 2019 3:33 pm

abuss368 wrote:
Tue Feb 12, 2019 2:10 pm
willthrill81 wrote:
Tue Feb 12, 2019 12:59 pm
abuss368 wrote:
Tue Feb 12, 2019 11:29 am
Many investment experts who I hold in high regard, such as Jack Bogle, David Swensen, and Warren Buffett, recommend to avoid speculating in gold.
Remember that Bogle recommended a 5% allocation to gold.
Interesting. I checked the portfolio examples in "Bogle on Mutual Funds" but did not see that. Do you have a source or interview?
The link to the video where he recommended it is in this thread.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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abuss368
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Re: Investing in gold

Post by abuss368 » Tue Feb 12, 2019 3:50 pm

willthrill81 wrote:
Tue Feb 12, 2019 3:33 pm
abuss368 wrote:
Tue Feb 12, 2019 2:10 pm
willthrill81 wrote:
Tue Feb 12, 2019 12:59 pm
abuss368 wrote:
Tue Feb 12, 2019 11:29 am
Many investment experts who I hold in high regard, such as Jack Bogle, David Swensen, and Warren Buffett, recommend to avoid speculating in gold.
Remember that Bogle recommended a 5% allocation to gold.
Interesting. I checked the portfolio examples in "Bogle on Mutual Funds" but did not see that. Do you have a source or interview?
The link to the video where he recommended it is in this thread.
Thanks. I will check it out.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

birnhamwood
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Re: Investing in gold

Post by birnhamwood » Tue Feb 12, 2019 9:00 pm

My grandchildren get a 1 oz gold coin at Christmas and another oz on their birthdays. They save them, so I consider it a small investment of sorts.

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arcticpineapplecorp.
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Re: Investing in gold

Post by arcticpineapplecorp. » Tue Feb 12, 2019 9:10 pm

In a 1998 speech at Harvard, legendary investor Warren Buffett shared his thoughts on gold:

“[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility.”

gold has kept pace with inflation over the past 2000 years. an ounce of gold could buy a man a fine tailored toga 2000 years ago and now an ounce of gold can buy a man a fine tailored suit. Two problems, though. First, gold has kept pace with inflation over long periods of time, but not always over short periods of time. Second, if you're concerned about inflation wouldn't it be better to buy TIPS and I-Bonds instead?

So what are gold bugs really concerned about? Not generally inflation, but collapse of civilization, confiscation, etc. Gold has been confiscated throughout history and the U.S. has changed the value of gold overnight when it decided to. Finally, if you're worried about breakdown of civilization gold is not going to help you. You'd need canned food, dehydrated food, water, guns, ammo and toilet paper, and lots of it.

There was a good podcast on planet money called Libertarian Summer Camp in which the participants didn't use money. They only used gold to trade. Think it went well? Think again. Listen here: https://www.npr.org/sections/money/2017 ... ummer-camp

Read more about the history of gold returns:
https://awealthofcommonsense.com/2015/0 ... d-returns/

Most receommend 5% or so (not generally more than 10%) to gold, but as has been said, in a catastrophe that's not going to save your bacon. So you wouldn't bet the farm on gold, and therefore too small an amount in gold won't be helpful either. Why not just invest in assets that produce something (stocks) and lend your money to earn money (bonds) rather than hoping to hoard gold to sell to another for more than you paid (and possibly not).

I talked with a guy about 4-5 years ago who swore that silver always gets to $17 in the fall (he bought it around $15 or so. Know where it's at know? $15.75. Yeah, I know it's silver and not gold, but the idea is generally the same.
"Invest we must" | "By God, If John Q. Public doesn't get the word after two Swedroe books, two (Bill) Bernstein books, and four Bogle books, he (she) has only himself to blame!"

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