if markets are on the same pace over the next 5 years, would it be wiser to invest 10,000 dollars in gold bulion, as to a certificate of deposit through Bank of America with a percent rate of 4% anuall gain?
Which will accure a better profit? I put 10,000 us dollars in a C.D. that yields 4% annually or 10,000 gold?interest only loan
The above posters are correct to a certain extent. The first person is assuming that EVERYONE should have a balanced portfolio. That may be true for the majority of investors, but not for everyone. There are people out there that concentrate in one area such as equities or derivatives and do very well.
Mslider2 is correct, gold prices do fluctuate and a 50/50 split is not a bad idea.
Is gold a good investment? The previous posters are correct in that gold prices can fluctuate, but if you are aware of that, then that%26#039;s half the battle.
Let%26#039;s look at a few things. First, a CD at 4% interest. According to official gov%26#039;t numbers, inflation is running 2%. I live and work in DC and I have many friends that work for the gov%26#039;t and they all say that the gov%26#039;t %26quot;massages%26quot; the numbers so data looks better than it really is. If you think the gov%26#039;t isn%26#039;t manipulating the data, then you%26#039;re living in a Polly Anna world. The inflation rate is actaully more like 8%, so your 4% cd (or even 5.07% CD) is not keeping up with the inflation rate. Second, because you have your money in the bank doesn%26#039;t make it safe. There are 2 things occurring right now that are going to severely impact the banking industry and IMHO will cause many bank failures:
1) The housing market is coming undone, and default and foreclosure rates are going up. With many lenders recently write zero down mortgages and median home prices falling, banks may not be able to sell their REO property for enough to cover the original mortgage. Yes, the banks do securitize their mortgage portfolios and sell the to Fannie Mae and Freddie Mac, but right now Fannie Mae is in such bad shape that they haven%26#039;t filed financial statements in years and has filed exceptions for those years. A failure at Fannie would be catastrophic
2) The banks have taken on HUGE derivatives risk exposure. Check this out, at the end of Q3, 2006 the top 25 banks in the U.S. had $5.9 trillion in assets. Do you know what their derivatives holdings are? According to the report issued by the Office of the Comptroller of the Currency (OCC), the total derivatives held by these top 25 banks is, get this ---------- $126 trillion; 2,035% of assets. Even at 40:1 leverage, that%26#039;s still $3.15 trillion, that%26#039;s still over 50% of assets. The fastest growing sector in their derivatives holdings are credit default instruments, ie, derivatives that protect them against a default. The problem is that counter-parties to these instruments are virtually none existent, which means if there is 1 serious enough counter-party default, it%26#039;s going to be a domino effect. Imagine for 1 second if over 50% of your assets were committed to the riskiest investments out there, wouldn%26#039;t that scare the pants off of you? Yet, our banks (JP Morgan Chase, Wachovia, Bank of America), etc have over 20 times the risk exposure relative to assets. That%26#039;s insane. These are just the top five banks. First column is derivatives holdings, second is assets:
- JP Morgan Chase $62.6 trillion $1.17 trillion
- Bank of America $25.5 trillion $1.19 trillion
- Citibank $24.5 trillion $816 billion
- Wachovia $5.2 trillion $517 billion
- HSBC $4.1 trillion $166 billion
Just the top 5 banks have $121.9 trillion in derivatives holdings, and $3.859 trillion in assets; they account for over 96% of the derivatives holdings. This is a time bomb waiting to go off.
So, just because your money is in the bank doesn%26#039;t mean it%26#039;s safe. Ask anyone that lost their money in the bank runs of the 1930%26#039;s or anyone that lost their money in the S%26amp;L crisis of the 80%26#039;s.
Gold does indeed fluctuate, but if you look at the longer term trend, you can compensate for that. For example, from 1980 to 2001, gold was in a 21 year secular bear market. It bottomed at around $255/oz. But since 2001, gold has been in a bull market, and it%26#039;s only 5 years old, so it%26#039;s got a ways to go. For example, from 2001 to the end of 2006, gold is up 145.48%. In 2006, alone, gold is up almost 20%. That%26#039; vastly better than 4% from a CD.
Also, consider this; gold made it%26#039;s highest closer ever at around $850/oz. gold is currently trading around $630/oz. which is $220 below it%26#039;s all time high, but if you adjust for inflation, in order for gold to match it%26#039;s all time high in inflation adjusted terms, it would need to be trading around $2500-$3000 oz., thus it%26#039;s $1870-$2370 below it%26#039;s inflation adjusted highs, thus has a ways to move.
Now, I%26#039;m not saying buy gold instead of investing in CD%26#039;s. I only went through the above discourse to give you a fuller picture of what%26#039;s going on. Many people will tell you do/don%26#039;t and then only give you have the picture. Yes, gold prices fluctuate, but it%26#039;s trading well below it%26#039;s inflation adjusted price. Yes, banks are generally safe, but they%26#039;ve overexposed themselves to alot of risk. It doesn%26#039;t mean the banking industry is going to implode, but with that much derivatives risk exposure, the chances are much greater that it can implode.
The one poster is correct in saying don%26#039;t buy gold until you%26#039;ve done your research. Not only such you thoroughly research each sector, but you need to really do some soul searching ask ask yourself %26quot;how much risk am I willing to take and am I willing to take that kind of risk in gold%26quot;. For the first poster, a diversified portfolio is right for them. They subscribe to the ideology %26quot;Don%26#039;t put all your eggs in one basket%26quot;. I on the other hand subscribe to the ideology %26quot;Put all your eggs in one basket and watch that basket%26quot;. That%26#039;s because that%26#039;s right for me. I%26#039;m an inherent financial risk taker, so I%26#039;m willing to take on the additional risk of an undiversified investment regimen. Those that are more risk averse need a diversified portfolio. You must find what%26#039;s right for you. If you can handle the risk and feel you can get more bang for your buck from gold, then go for it. But, if you can%26#039;t handle the risk, then under no circumstances should you invest in gold.
Which will accure a better profit? I put 10,000 us dollars in a C.D. that yields 4% annually or 10,000 gold?
loan
It appears you know little about investing. These are not choices an investor would make.
A good asset allocation will contain bonds, CD%26#039;s, Stocks, REITS %26amp; some commodities (like gold %26amp;/or silver), in percentages that creates a balance that you fell easy with.....
A CD gives you a safe place to put your money.After taxes and inflation your cash has less buying power. Gold can go anywhere (up or down). It%26#039;s speculative %26amp; for most people should be less than 3% of all their investments.|||According to
www.bankrate.com
National bank of Kansas city is currently paying 5.07 percent for a 4 year $10,000 cd.
in 4 years that gives you about 20 percent or $2000
Gold can go up or down, and is very flexible.
If in doubt, I would split the difference and go 50-50, 5K for each.
Certainly the CD would be safer and more sure|||Neither. Don%26#039;t invest in gold. Don%26#039;t invest in gold. Don%26#039;t invest in gold. Don%26#039;t invest in gold. The previous poster was right. Since you don%26#039;t know much about investing you shouldn%26#039;t do it. Learn how first. Then you can make money instead of losing it. Read some books and Yahoo finance. Take a class on it. Don%26#039;t do it until you know what you%26#039;re doing.
