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Should You Start Investing In Gold and Commodities?

By Erik Folgate

This week was another very significant week of business and financial news. The Federal Reserve announced they would print up to $1.2 trillion dollars into buying up treasury bills and mortgage-backed securities. More money printing means more worries about mass inflation. The dollar took a sharp hit the next day valued against the Euro and British pound. Many of you are worried about your retirement accounts and investment portfolios with good reasons. You don’t need to act like the country is crumbling, but you should start thinking about your investment choices based on your age and risk tolerance.

How old are you?

This matters. If you are in your 20’s, 30’s, or early 40’s, consider continuing to invest in stock market securities. You have plenty of time to see the market rebound again and make you very wealthy when you have securities at a deeply discounted price. If you are in your 50’s or 60’s, you should definitely be looking to shift your investments to something more secure and safe like a bank CD or bond funds.

What is your risk tolerance level?

Do you like to roll the dice or do you cry every time you lose a dollar in the market? If you don’t mind taking a big risk, start investing in all of the market sectors that tanked last year and the beginning of this year such as financials, energy, and real estate. If you have no risk tolerance level, then consider a mix of bond, dividend, and balanced ETF and mutual funds. You may also want to own a little bit of gold and oil to hedge your account from inflation.

Gold and Commodities will protect your portfolio from inflation

When the dollar weakens from inflation, the demand for gold goes up. Also, commodities such as oil and natural gas tend to move inversely from the strength of the dollar. Personally I don’t think that gold and commodities are a good long-term investment. But, if you’d like to hold them for six months to a year to protect from inflation, that might be a good idea.

You don’t even need to own futures notes or actual gold to invest in gold and commodities. If you want an easy way to invest in these assets, look at the ETFs such as USO, DIG, XLE, IGE, and GLD. GLD buys and holds the gold for you and companies related to it, so you don’t have to deal with all of those gold coins.

If the government keeps giving out money from thin air, there is no question that the dollar will weaken. Consult your personal financial advisor or planner for more information about protecting your portfolio.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • http://www.financialnut.com Trevor @ Financial Nut

    Gold may be good if you’re a little bit older (like you said), but it still makes me nervous because of how well gold has done lately. If you look at it’s track record, after some of those peaks come steep declines.

    Who knows, though. They keep printing all of this money and gold is going to be EXACTLY what I buy, and then I’ll hide it in my cellar. :)

  • http://www.investoralist.com Dana

    The case for gold is not hard to make. But here’s something I came across recently that argues against it, see if as a bit of contrarian medecine? :)

    http://brontecapital.blogspot.com/2009/03/gold-is-very-expensive.html

  • http://www.testubeiq.com Ryan @ IQ test

    I try to stay away from gold in times of recession. There is a huge spike in gold but then it will level out. If you want to invest in this market, do it in housing. The returns will be greater and more short term.

  • http://www.manhattancalumet.com james moylan

    I have a web site where I research stocks under five dollars. I have many years of experience with these type of stocks. I would like to suggest a stock that is in the agriculture commodities business. I think its a great value here the company bunge symbol {BG} the stock trades around 67 dollars a share I think the stock could get to 300 dollars a share over the next five years.
    [bg] the stock trades around 67 dollars a share I think the stock could get to 300 dollars over trhe next five years.

  • http://irvin-loveney.blogspot.com/2012/06/whats-currency-options-and-how-it-is.html Joseph Kottow

    I trade commodities, or commodity related stocks, on a regular basis. This year saw amazing volatility in previously ultra boring areas of the economy (e.g. coal, corn, etc), so buying the ETFs with a good stop loss order to protect yourself from a freak sell off is the way to go — for me at least.

  • sherryefarrand

    Thanks for sharing

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