Where would you invest $10,000 today?

[PTC]

Investing in metals is just having a punt.

True dat. It's not really about picking the big winner. The only easy way to reduce risk is to diversify it away.

[NickM]

True dat. It's not really about picking the big winner. The only easy way to reduce risk is to diversify it away.

Into what? How has diversification worked the last 6 months?

If the financial system or the dollar collapses, how much will your diversified stocks be worth? Why are commodities (which are tangible, worth carrying goods) not a true way to reduce risk? If the scenario that was implied above were to happen, would you rather have gold or electronic stock certificates? Gold has carried nearly a constant value for thousands of years across the globe. What makes it suddenly worthless in today's world?

[resipsa]

Into what? How has diversification worked the last 6 months?

If the financial system or the dollar collapses, how much will your diversified stocks be worth? Why are commodities (which are tangible, worth carrying goods) not a true way to reduce risk? If the scenario that was implied above were to happen, would you rather have gold or electronic stock certificates? Gold has carried nearly a constant value for thousands of years across the globe. What makes it suddenly worthless in today's world?

I guess it really depends on what your goal is. If you think a real financial collapse is coming, then you are probably right that precious metals are more likely to hold some value as opposed to anything that relies on a functioning financial system to have value (currency, stocks, bonds, etc). Personally in that case, the world is going to shit and I'd rather be heavily invested in firearms.

Now if your goal isn't simply preservation of your assets, but an attempt to grow them, then precious metals are rarely a good bet over the long term. I'm not smart enough to know if now is the time to buy for the short term, but I feel reasonable comfortable in stating that you are far more likely to have a better long term performance with a diversified strategy(the longer the time period, the stronger the argument). Historically, I don't think there are many periods of time where you would have wanted to hold precious metals over a long time period vs. other alternatives.

As for judgeing a diversification strategy over the last 6 months, that's kind of silly as the whole basis for that kind of strategy is the long term view. Its been an ugly 6 months, but any individual investment (including gold or silver) have had short term drops of much greater amounts (off the top of my head, I think gold droped 50% in the early 80s).

Diversification limits risk over the long term, that really can't be disputed. Is it the best overall strategy when you look backwards? of course not. But it allows you to receive most of the benefits of upward trending market, while limiting risk.

[PTC]

Into what? How has diversification worked the last 6 months?

If the financial system or the dollar collapses, how much will your diversified stocks be worth? Why are commodities (which are tangible, worth carrying goods) not a true way to reduce risk? If the scenario that was implied above were to happen, would you rather have gold or electronic stock certificates? Gold has carried nearly a constant value for thousands of years across the globe. What makes it suddenly worthless in today's world?

Commodities can reduce risk through diversification, just about anything can, but not if you put all of your money into 1 commodity. It's a statistical thing.

As for the last 6 months, risk is very high... high enough to be an anomaly in the pool of data from the last 100 years of trading.

[Spry]

Investing in metals is just having a punt.



If this is the scenario you're investing for then you'd be better off "investing" in canned food, guns and ammo.

food, guns and ammo also solid investment choices right now. again, it's just for some diversification and asset protection.

Would you think you are safer with $10k in cash or 10k in silver coins? I'd wager on the silver.

Also agreed, this is not a 'growth' strategy, this is a 'protection' strategy.

[pheal]

I'm not an expert when it comes to finance, but I would keep these 10k in the bank, work hard to make more money and invest in parking space or garage (if you live in a big city, it's always a good investment), a small apartment or even a house for rental purposes. In my humble opinion and despite what happened during the last 6 months, nothing can beat real estate.

[PokerNations]

In my humble opinion and despite what happened during the last 6 months, nothing can beat real estate.

I think we're going to continue seeing real estate values drop for easily another 1-2 years. So it's probably better to wait and let them drop and sellers get even more desperate to offload properties, before jumping on them.

[NickM]

I don't know much on this topic, but I believe I saw a stat that historically real estate value, not counting the last 20 year mega boom, has roughly increased proportional to inflation. Someone correct me if I'm wrong.

[TheGooner]

I don't know much on this topic, but I believe I saw a stat that historically real estate value, not counting the last 20 year mega boom, has roughly increased proportional to inflation. Someone correct me if I'm wrong.

You're right - and your wrong.

You're right - The intrinsic value of buildings themselves does tend to track inflation, because a maintained building matches the increases in the cost of materials, labour and construction as it goes up.

This component is the nard and fast value of the bricks and mortar.

You're wrong - because the most significant part of property prices is not the building but the location. Land is finite. Good located property has tended to increase at a far greater value than rural land.

This component is the speculative value, and will vary up and down according to economic conditions - but well located property is a quality investment that beats inflation.

Unfortunately, quality well located property is also usually priced as such too.

[TheGooner]

Gold has carried nearly a constant value for thousands of years across the globe. What makes it suddenly worthless in today's world?

We've had a monetary system for thousands of years - since about 470BC when the Greeks invented coinage - and so we've had a system of barter and trade and commerce. Prior to that gold was simply pretty and didn't rust so they made jewlery out of it.

Gold and Silver were a method of value store, due to scarcity, and their durability, which is why they were used as the original coinage. But even then gold coins were stamped with a mark of an authority that backed the coin and tended to circulate within the issuing region.

Without the civilisation and society to trade safely, gold and silver become baubles again in my opinion, and I would not trade my tin of baked beans for your gold ingot if we hit the big slide.


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That's not to say (assuming there is no global meltdown) that gold, silver will not appreciate against the greenback. The US fiscal situation is a shocker, and the only reason that the US Dollar is holding up right now is the "flight to safety" by US based investors who are repatriating dollars in bulk and maintaining the level.

But technically, these budget blowouts and bailouts are thought to be likely to have a massively negative effect on the US dollar in the medium term, so having gold, or a Euro bond, or even investments in the Chinese Yuan would be good plays against a collapsing dollar.

(Mind you that "technical commentary" is being provided by the same people that said "derivatives reduce risk" for the last decade just before this latest crisis too - so take expert comments with a grain of salt)