3 Reasons why you buy Gold

This week’s edition:

• The Three 3s about Gold (why you should buy it, why not and how to invest)

• This week in Business

• The Big Green Vault

Good as Gold

One of my favorite concepts is the Lindy Effect.

The gist of it is that the longer a non-perishable thing has been around, the longer you can expect it to stay around (the opposite is true for a perishable thing).

A book (non-perishable thing) that has been in publication for 50 years can be expected to be published for 50 more.

A book that’s been in publication for a thousand years is likely to be published for a thousand more (ex: Holy Books).

This is not the case for say a banana. The longer it’s been around the closer it is to perishing.

I think the Lindy Effect adds an interesting dimension to the way we look at things.

Gold’s status as a Safe Haven is ‘Lindy’.

1. The first Gold coin was minted nearly 3,000 years ago.

2. Whenever currencies fail, Gold is one of the first things people buy.

3. Central Banks still stockpile Gold.

Let’s breakdown:

• 3 reasons why you should buy Gold 

• 3 reasons why you shouldn’t

• 3 Ways to invest in Gold

3 Reasons Why You Should Have Gold in Your Portfolio

1. Inflation Hedge: Gold has historically held its value during periods of high inflation. When the cost of goods and services rises, gold tends to rise as well, helping to preserve your purchasing power.
   

2. Portfolio Diversification: Gold often moves independently of stocks and bonds. Adding gold to your portfolio can help reduce overall volatility and risk, especially during times of economic uncertainty.
   

3. Safe Haven Asset: In times of geopolitical turmoil or financial crises, investors often flock to gold as a safe haven. Its long history as a store of value provides a sense of security during uncertain times.

3 Reasons Why You Shouldn't Invest in Gold

1. No Yield: Unlike stocks or bonds, gold doesn't generate any income. You're relying solely on price appreciation for returns. It has underperformed stocks in terms of return.
   

2. Price Volatility: While gold is considered a safe haven, its price can still fluctuate significantly in the short term. Gold prices dropped 45% between 2011 and 2015 and didn’t recover until 2019.
   

3. Storage and Insurance Costs: Physical gold can be expensive to store and insure, adding to the overall investment cost.

3 Ways to Invest in Gold

1. Physical Gold: Buying gold bars or coins gives you direct ownership, but comes with storage considerations. There are companies that offer this service and charge a storage fee (which can impact total returns).
   PS: you should thoroughly research the company to make sure they actually have the Gold.
   

2. Gold ETFs: Exchange-traded funds (ETFs) track the price of gold and offer a convenient way to invest without holding physical gold.
   

3. Gold Mining Stocks: Investing in companies that mine gold can offer leverage to gold prices, but also carries higher risk. It’s a stock after all.

This Week in Business

1. Gold sets record highs: growing economic uncertainty, geopolitical tensions and record Gold prices come hand in hand. Does this mean there’s an imminent crisis ? Not necessarily (though there’s always something around the corner)
   

2. China opens an economic war chest: Chinese stocks had their best week since 2008 after the government unleashed $114 Billion to boost the market. But, investors still worry about the CCPs’ opaque decision-making process and the potential for further unpredictable policy shifts.

The Big Green Vault

• The Lindy Effect Explained A good 90 second video explaining what the Lindy Effect is.

The information contained in this newsletter is for general informational purposes only. It should not be construed as financial or investment advice. Please consult a qualified financial advisor before making any investment decisions.