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How Much Gold Should I Own?

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You have things like house insurance in case of things like a fire. Why do you not have money insurance in case of bad economic times?

You have house insurance in case of things like a fire. Why do you not have money insurance in case of bad economic times?

Looks like you have realized that investing in gold is a very smart idea. Next question is how much gold should I own then?

This is very personal and it all depends on what kind of investment strategy you have. But one thing is for certain, every healthy portfolio should have some physical gold.

Most professional investors heavily agree on that but the bigger question, where they all differ, is how much you should own. Before we answer that question I wanted to share with you the thoughts of Jim Cramer.

Jim is a former hedge fund manager and a best-selling author on investing. He is also the host of CNBC’s financial television show “Mad Money”.

Cramer recommends gold because it tends to go up when everything else goes down. It gives investors insurance against geopolitical events, uncertainty and inflation.

“Just as you wouldn’t own a home or car without insurance, you shouldn’t have a portfolio without gold, Cramer said.”

Gold as an insurance

Just like Jim is saying, gold is an insurance to your money. The reason why gold is seen as an insurance is because it is outside of the financial system.

What I mean with that gold is outside of the financial system is that gold is an hard asset. Something that you can hold in your hand that got value. When you are owning stocks and bonds you are basically just owning a piece of paper saying that you own something.

You can’t really feel the value by touching it as you can with hard assets such as gold, silver, real estate or land.

We all remember what happened 2008 right? When the financial system came crashing down over night and where investors lost at least 50% of their money (some of them lost everything). This is how fast you can loose your hard earned money if you have it within the financial system (within banks in stocks, bonds mutual funds etc).

Because gold is outside of the financial system it kept it’s value during the panic of 2008. If you had your money in gold you would not have lost 50% of your money over night.

So look at gold as your insurance that is outside of the financial system. Even if hell breaks loose gold will keep it’s value and you can feel safe that your money won’t disappear over night as stocks and bonds easily can.

Gold has been humans number one asset for almost 5000 years to preserve and increase wealth. For all of this time gold has kept it’s value. It has seen stock market crashes, wars, currency collapses, empires fall and everything else you can think of during the last 5000 years. And still it has kept it’s value. That’s why gold is seen as a safe investment.

People fleeing the dollar into physical gold

People are moving into gold as an insurance. Do you think it’s a good idea to have some of your money in physical gold? That has held it’s value for around 5000 years?

Okey, I get it. So how much should I get then?

This is the harder question to answer. Every serious investor agree that a healthy portfolio should have some physical gold as an insurance.

Some people are saying 5% of your money should be in gold, some are saying 20% and some are saying 100%. Which one is it you might ask?

Here is when it comes to what your investment strategy is. Because remember, gold has no yield. This means that by owning gold you will not receive money every quarter like you do with stocks that have dividend.

So gold has no cash flow, you buy it and then you put it away and watch it go up in price.

Most professional investors are saying that you should have between 10-20% of your money in physical gold as an insurance. But this is also very personal. Because gold is an insurance for bad economic times it depends on how bad you think the times ahead will be.

If your like me and don’t believe that the current economic system of debt will last then you should probably own some more. I mean look around the world today. Europe is in big trouble with all the debt they have. The US is 19 trillion dollars in debt and are adding 1 trillion dollar a year.

Do you think this is sustainable or do you think we might see a new economic collapse soon? Just as we did in 2008? I definitely do, which is why I like to own more gold than what the average investor do.

I personally think that in the current economic environment that we’re in you should have at least 20% of your money in physical gold. When I say “your money” I mean the amount of money that you are willing to invest.

Say for example that you are willing to invest/save 10% of your income each month. Then 20% of that 10% should be in physical gold (Hmm, hope that made sense otherwise leave a comment).

giant hole saying us national debt.

US, a long with most other countries, are drowning in debt. Do you think that’s sustainable? Or will we see another economic crisis where gold will be the safe haven?

Gold will skyrocket within the next few years

Lots of people only say to keep physical gold in your portfolio as a safe haven. I think that is a great advice but it’s not the whole story. Me, and a lot of other people, think that gold has a huge potential to gain value during the next few years.

Have you realized how fast prices are rising today? How much less groceries does $100 get you today compared to 10 years ago? How much more gas did $20 give you 10 years ago compared to today?

I’m pretty sure your answer is: a lot more. 

The reason why is because our governments are printing so much extra money today to be able to pay for their bills. By printing all this extra money they are creating inflation that is pushing the prices of the goods and services up.

Let’s take the United States as an example. When I’m writing this the US national debt is around 19.2 TRILLION dollars and it’s rising rapidly. Every year the US adds between 1-2 TRILLION dollars in debt.

So the US (along with almost every country in the world) is bankrupt. If they can’t borrow more money they will not pay back any of the money they already borrowed. Even when they have to pay interest on the national debt, they borrow that as well.

This thought that you can just keep printing more and more money, adding more and more debt is obviously not sustainable. You can’t pay off your MasterCard with your VISA indefinitely.

This has happened multiple times in history and every single time it has ended with the paper currency (the dollar for the US) going to ZERO and gold becoming incredibly valuable in a very short period of time.

I personally think that it’s just a matter of time before that same history repeat’s itself. Check out my long term gold price forecast for a more in depth talk about how high the gold price can go. And the reasons why.

Gold price going up and dollar going down.

The further down the dollar goes the higher up the gold will go.

Final Thoughts

I hope you got a lot of your questions answered with this post, if not please leave a comment below. Or if you have any other input.

How much I should own is a very personal question and it depends on your investment strategy. But most people agree that you should have somewhere around 10-20% of your money in physical gold as an insurance.

Remember that gold won’t give you any yield like stocks with dividends. So it’s not an investment that keep bringing you cash flow.

If you don’t believe that the current economic system is sustainable. That something pretty bad will happen (like a lot of people are starting to say now) there is no reason why you can’t have more than 20% in physical gold.

Remember, physical gold is outside of the financial system. That is what makes it a very safe investment. But because of our current economic system and the problems that we face there is also a huge potential for gold to go up in price very fast.

Last question to you is: Are you going to follow big time investors, like Jim Cramer, and add physical gold to your portfolio?


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14 Comments

  1. Great Article. I have been considering investing in Gold for a while now and this clarified a lot for me. Do you know of any methods in gold investments that could generate some kind of cash flow similar to accumulating interest in a money market saving account?

    • Hi Zac, thanks for the comment.

      I don’t think that there is a way to generate cash flow on just physical gold. I know that there are gold mining stocks that give out dividends but then that is stock investing. Gold is a metal doesn’t generate any cash flow. What it does is protecting you for economic turmoil and also it’s a great hedge against inflation. Because gold has gone up a lot people will look at this as “interest”. But you still won’t see that money or that cash flow until you sell your gold bar.

      Have 80% of your portfolio in cash flow producing assets like real estate, stocks with dividends etc and then have 20% in physical gold as a protection. See it as your savings that no matter what happens will always be there, and will always purchase you something.

      Marcus

  2. You make some great points Marcus. The U.S National debt is seriously insane. 20% of my income into gold does seems like a lot to me but it does seem like a good idea. Every time I read your articles it seems more and morel like a good idea to invest into gold haha.

    • Hi Matt, thanks for the comment.

      Yeah the national debt is insane and there is not way that it can keep growing indefinitely. I did not mean 20% of your income, sorry if that was what you interpreted. I mean 20% of your portfolio. And portfolio is your investing money. So say that you save 10% each month for your savings and investments. Then 20% of that money should be allocated to gold.

      If you have enough income to put aside 20% each month then put 20% of that money into gold. Hopefully that cleared things up.

      Thanks a lot Matt. Yeah to buy some gold is to me almost a must. Because think of it, your not really buying anything. You are just transferring declining paper dollars into gold. So it’s not like buying a bunch of vitamins or something that after the month is over you just have a empty jar. After the month is over with gold you still own the gold and hopefully it’s worth more than when you bought it 🙂

      Start transferring some declining paper dollars into hard physical gold.

      Marcus

  3. Great article Marcus! Gold seems like it’s been stead for years and actually have gone up a lot in value. Do you recommend buying physical gold or buying it electronically via an online broker? I read before that they even had gold vending machines in Abu Dhabi but I doubt they have any here in Canada.

    • Hi Andy.

      Yeah gold has gone up in value for a long time now. Just as an example: gold was around $35 for one ounce in 1970. Today it is around $1300. So gold has gone up almost 38 times in the past 45 years or so.

      I personally like to buy physical gold and hold it myself. There are places where you can buy gold online and then store the gold with them. Just need to be careful here. Most companies that operate in that business actually don’t store your gold.

      Yeah these gold ATM’s are really cool where it’s that easy to transfer some declining paper dollars for hard physical gold. Not sure if Canada has got one yet. If not I think it’s on it’s way seeing that Vancouver just launched a BitCoin ATM.

      Marcus

  4. Hey Marcus

    I didn’t realise how “safe” gold was as an investment. You make a very interesting point about if things go downhill quickly, unlike stocks and bonds, gold will continue to hold its value.

    Thanks mate. Some great tips.

    • Thanks for the nice comment Andrew.

      Yeah gold has held it’s value for over 5000 years. During this time period it has probably seen everything and still it has always kept it’s value. And actually, usually when a big economic event happens gold will skyrocket in price.

      This is why owning gold is just not a safe haven (although it’s a very good property of gold), it also have huge upward potential.

      Marcus

  5. Agreed Marcus.
    Gold is awesome in electronics and unlike diamonds (fake supply and demand) there is actually a limited, set, amount of gold.
    Wish I had some more gold – What’s the best way to get some?

  6. I’ve heard that it’s best to diversify your assets so owning a bit of everything from stocks, gold, wine, painting to real estate.
    I personally agree with you that the current economic system is not sustainable and likely to collapse. I follow Peter Schaffer who called the crash on 2008 and he tells everyone to buy gold. How would one go about that? Would you get coins or bar?

    • Hi Dinh, thanks for the comment.
      Yeah diversifying is never a bad thing as long as what you actually invest in is something that you know. I personally stay away from the stock market right now because me, just as Peter Schiff, thing that the stock market is over valued and is due for a correction.

      Peter Schiff thinks the same as me when it comes to the currency crisis that will happen. This time around it wont just be a stock market/housing market crash like in 2000 and 2008. This time the dollar will collapse and the US will somehow have to admit that they’re bankrupt. Either be actually defaulting or by printing money.

      Anyhow having gold will protect you from this coming economic crash.

      Personally I buy gold bars. But if you buy gold coins it doesn’t really matter. As long as it’s not numismatic coins. Check out: http://whyphysicalgold.com/how-should-you-invest-in-gold/ for my take on how to invest in gold.

      Marcus

  7. Hello Marcus,
    again a very good article about gold. I personally agree with Jim, that you should have some gold in your portfolio and I think, that at least 10% to 20% of your investment should be in gold, because you don’t get any cash flow or interest income as you already said.
    Normally I agree to the statement, that gold is a good insurance for bad time, but in 2008 gold went down as all the other assets, which I can hardly understand. Though it went up later.
    I think, when the situation gets worse, I will increase the percentage of gold in my portfolio.

    • Hi Bernd. Thanks a lot for the comment.
      Yeah gold did go down 2008 but then it went straight up again like you said. I think that was a preview of what will happen. When the debt default happens I think we will see deflation first (because the debt evaporates which is a lot of money). But then our central bankers will freak out about the deflation and run the printing presses like never before.

      I wouldn’t be surprised of gold goes down (not as much as everything else) in the beginning of the reset and then just skyrockets. Because even if gold went down a bit in 2008. I didn’t go down nearly as much as stocks and other assets. We were in a deflationary mode, including all assets.

      Marcus

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