Skipping straight to the picture at the end of this article (you just got to do so, it's my favorite gold bullion coin), the
answer seems obvious. Gold is captivating, it's beautiful. When you hold the one troy ounce Krugerrand in your hand, it has
a magical presence, and I can never say "no" to buying more (of course, money pending)! However, when you are dealing with gold,
stocks, or really anything in personal finance, you have to take the emotions out of it. No matter how captivating gold may be, when you're
trying to answer the question of whether to buy or not, you need to approach things with a logical and thoughtful mindset.
If you've been reading Gold Why for a while, you know that I haven't written too much in the past few years. I have done a bunch of YouTube
videos and have done a few posts here and there, but have generally remained quiet. Part of the reason is I just was not buying. It's
difficult for me to write about gold when I'm on the sidelines and saving my money. However, when I start buying, I really do enjoy writing
and getting into things here on Gold Why! By the very fact that I'm writing this post, you can probably tell that I'm buying some gold
bullion right now. While I'm not a licensed investment advisor and this post is just for entertainment purposes, let me
walk you through my own thought process in deciding to buy gold.
Consideration 1: How Large Is Your Existing Position?
Are you just getting started or do you have a large position? When I say "large" I'm not talking about absolute dollar terms, but
am speaking about percentage of your overall assets (your overall portfolio). I'm of the mindset that gold bullion (and other metals such
as silver) deserve a certain percentage within one's overall assets. You need to determine that percentage yourself. The true gold bug may
want a very high percentage, while the more traditional investor may want a low percentage.
When you're a beginner, you really can't go wrong. You just want to buy and accumulate a starting position. If you buy at a high price,
it's not going to hurt too much in the long-run since you are going to be dollar cost averaging over time. The best time
to start anything worth doing is now! However, what if you have a large position already? This is where things get tricky. When you have a
large position, you have some leeway to wait. You can try to time the market a bit more and pick up gold at cheaper prices.
While I'm a smaller time investor, my gold allocation has been historically strong as a percentage of my portfolio. That percentage is
shrinking with the price of gold towards multi-year lows. With my percentage shrinking and my patience paying off, I personally
decided it's time to start accumulating again!
Consideration 2: Where Is The Price of Gold?
I'm a huge believer in the market being a pendulum. The pendulum swings back and forth. Sometimes assets are overvalued, sometimes assets are
undervalued. A few years back, gold got very expensive and stocks got seemingly cheap. These days, the stock market is at multi-year highs with
gold at multi-year lows. The Chinese stock market is facing concerns (hitting the headlines almost every day), and the US stock market is also
exhibiting volatility as a result. I would not be surprised if stocks correct at some point. Don't get me wrong, I'm a fan of stocks,
especially those that pay increasing dividends over time. That said, it's hard to ignore the fact that stocks are expensive right now,
with gold being relatively cheap. You typically want to rotate into an asset class when it's undervalued. You want to stop buying
when things get over-heated. While I don't know if gold will drop further, I do know it's well off the highs. I'm much more comfortable
buying gold bullion at current prices given the price correction that has happened over the past few years.
Consideration 3: How Is The Global Economy Doing?
I'm not an economist, so I'm not going to claim to know all the answers. One thing I do know, however, is fiat money is being printed at a
fast pace. The US national debt keeps climbing to incredible heights. Interest rates are at historic lows, yet economic growth is still
lower than economists had hoped. The stock market recovery of the last few years has been fueled by these incredibly low interest rates. I
don't see how more stimulus can be injected into the economy at this point. Maybe I'm just a worrier (I know that to be true). I certainly hope
for the best, but want to be prepared and plan for the worst. Given all the facts at my fingertips, I see a scenario where things could get
bad. Maybe they won't. Maybe the global economy is going to continue to recover. That said, the facts in front of me tell me that it's a
prudent time to be defensive with a true asset like gold coins. I view gold bullion as a wealth preservation and self preservation machine.
In times of good, my gold coins may erode in value, and I'm ok with that. In times of distress, my gold coins may be the only thing I own
of true, tangible value.
Consideration 4: Do You Have Funds Available To Buy Gold?
This consideration is a practical one, but worth underscoring. I only recommend buying gold when you have the money to do so, with a strong
buffer (emergency fund) in tact. I buy gold to hold forever. I never want to sell my gold. I believe gold brings good luck. I believe selling
gold can bring bad luck, although I've had to do this in a few financial pinches in the past (and came out of it just fine, thank goodness).
Because I aim to buy and hold forever, I need to plan wisely. What if a big expense arises? What if I lose my job? I try to have a
reasonable cash emergency fund before buying gold bullion. That way, I can sleep at night knowing that I won't have to sell my gold
if something bad happens to me.
Consideration 5: What Does Your Gut Tell You?
When buying gold coins, stocks, or really any financial instrument, only listen to yourself. Of course, do your research. Gather opinions.
At the end of the day, you are the only one that knows what's right for you. Only buy if your gut tells you to and you will have no regrets.
Don't get pressured by anything you are reading, or anything your friends are telling you. If you are on the fence, sleep on it. You want to
buy with conviction and confidence. I'm a proponent of the buy-and-hold strategy. Really vet things out before buying so you will hold
long-and-strong for many, many years to come. So, should you buy gold? Only you have the answer. That said, I hope the framework
presented today helps you think through the decision logically and methodically.
Fun Picture of The Day: Should I Buy Gold?
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