To Thine Own Self Be True
Hello fellow Fools!
I've been facing a possible financial decision over the past little while -- a possible investment I've been toying with that I've been hearing an awful lot about in the financial news lately -- that being gold.
Gold as an investment vehicle has a lot of proponents, and for quite a few good reasons. There are a lot of people here on CAPS who know a lot more about the shiny stuff than I would probably ever hope to, and many of them are bullish on gold. After all, given the financial crisis there's a lot of uncertainty out there regarding the value of stocks and even cash, and that sparkling metal is a hard asset that has a history of holding its value well -- especially when macroeconomic circumstances seem the most dire.
After all, I've been hearing a lot about gold lately. One of my favorite radio programs which doesn't often deal with finance/investing matters had an author on not long ago explaining all of the reasons why gold is the place to be during the (what he believed would be) the continuing financial collapse. Turn to just about any form of finace/investing media and you'll likely see some lively discussions about gold.
And who hasn't heard the multitude of 'Cash for Gold' commercials urging people to stuff their unused/unwanted gold jewelry into an envelope and exchange it for cold, hard, cash?
This morning, though, I went back and read something I wrote in my blog back in late 2006.
While gold is a great inflation hedge, that's about all it is in my opinion. When one invests in gold, one is not investing in what I call an economically generative act. Gold bullion just sits there, and while it can go up or down in price, it doesn't actually *create* wealth.
When I wrote the preceeding excerpt I never thought I'd be turning to it more than two years later --let alone using it to remind myself why I have yet to add gold to my investment portfolio -- but I still find it to be true.
Which reminded me of something else I blogged about in July of 2007.
In my Foolish interview I mentioned buying Yahoo at pretty much the height of the dot-com bubble, even though for a great while I had steered clear of all things tech – partly because I didn’t understand the industry well and partly because I thought the valuations were incredibly high. I ended up, like a lot of investors, succumbing to the frenzy after watching stocks like this go up, and up, and up, and missing out.
I'm not equating gold investing to investing in tech companies at the height of the dot-com bubble -- but this exerpt sheds a great deal of light on my real motivations behind my toying with the idea of adding gold to my portfolio. I haven't changed my mind about my fundamental reasons for not having been a gold investor to date -- I'm simply worried that all of the media reports I've been hearing may be right, and that I may be 'missing out' by not investing in gold.
And that would be a lousy reason to invest.
I also can't help but keep thinking about those 'Cash for Gold' commercials. Maybe it's simply a sign of our tough financial times - increasing numbers of people who've lost their jobs or are facing some other personal financial crisis turning to this source of cash in increasing numbers. I can't help but think, though, that it might be a sign that gold might be entering 'bubble' status in its own right.
Either way, I won't be investing in gold today, or likely anytime soon. For those of you who are invested in gold or are considering it, I'm not saying to get out of gold, or not to invest. There are a lot of very bright people out there who think that gold is a great investment today. What I would ask you to do, though, is to honestly ask yourself why you are investing in gold.
As I write this, I am certainly glad I asked myself that very same question.
Russell (a.k.a. TMFEldrehad)