Should you invest in gold? Warren Buffett says “No”!

Last week, my driving instructor (yes, I’m learning driving!) asked me if I knew anything about buying gold. He said that he had some spare savings now and wanted to buy some gold since the prices for gold seem to be pretty low now.

Is it? I don’t know. He told me to try and find out more information for him. And so I did.

It brought me back to a few months ago when I saw one of my girlfriends posting on her Facebook wall with a few new gold bracelets that she bought. The description included was that since gold generally appreciates over time, buying now would be a good investment.

Upon more research, I’ve even found out that there are gold ETFs! So interesting. So technically speaking, you don’t have to own physical gold to own gold.

Wah, sounds good! Don’t even need to think of where to store your gold anymore. Use other people’s vaults lah! Hahaha…

Jokes aside, I did more “serious” research and found this on Youtube:

Looks like I won’t be buying and fondling gold anytime soon. Hehe. It also wouldn’t be able to help me build up the “income” part of my portfolio as commodity stocks do not provide any dividends (like duh).

Thanks for reading!

Miss Niao xoxo

Author: missniao

Hello! I blog about financial matters and things that average people can do to have a better retirement. I want to inspire people to take control of their money and have a better understanding about it. If you are interested to know more, follow me @ missniao.wordpress.com! :)

13 thoughts on “Should you invest in gold? Warren Buffett says “No”!”

  1. I considered investing in the Gold ETF here in SG as well – O87 on SGX. But I decided against it after I realise it does not pay dividends and is purely a gold price play. Which means I have to rebalance it in my asset portfolio regularly to capitalize on gains in gold prices.

    Liked by 1 person

      1. You might wanna consider hugging some cute bear bear; silver pandas are amicable and nice. ๐Ÿ˜€

        I remember years back, forumers from a certain Singapore precious metals forum were introducing silver pandas to their other halves in hopes that they would catch the gold bug/silver stacking “hobby.”

        Liked by 1 person

  2. Well, I do buy the gold ETF listed on SGX from time to time to balance the portfolio. At the moment, it is 5% of my portfolio. While it doesn’t pay dividend, it does have the benefits of engaging portfolio diversification. It is negative usually correlated to equities. People buy more gold when they are afraid or uncertain of the future. Have you heard of the permanent portfolio?

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    1. I think 5% is quite a good proportion. Even for the funds in CPF, you can only use up to 10% for buying gold. Perhaps I’m not there yet for the diversification of my portfolio.
      Haven’t heard about that, care to explain further? ๐Ÿ™‚

      Like

    1. Hello WarriorTan,

      I read about it and it seems to be an approach that is to be adopted by a defensive investor. My question would be if we were to hold two portfolios for a long term (e.g. a Permanent portfolio V.S. a low cost S&P500 index fund), which one would provide better returns? When I say long term, a suggested projected period could be from now until you retire, say 30 odd years.
      I’ve used the index fund as a comparison since 25% of the permanent portfolio which are reserved for equities is recommended to be also invested in a low cost index fund, but you could possibly compare it with the “gold” and “bonds” part of the portfolio. I think cash would be more relevant to the emergency funds that we should already have, just that we don’t usually add that into our equities portfolios, unless of course you are considering your net worth as your entire portfolio.
      Also, this method requires balancing from time to time which I am assuming will incur more transaction costs that could eat into your profits over the long term.
      Do you have any more information on the above points? This could be a worthy blog post. :p

      Like

      1. The benefit is risk diversification across different segment of the market so that you can get a good return adjusted for the risk that you take on (historical performance seem to validate this).
        I won’t say it is for the defensive investor. But definitely it is NOT for aggressive investor.
        On the rebalancing aspects, contrary to what you mentioned, literature seem to suggest that once a year rebalancing is sufficient. It is an invest and forget tool.
        That is also an attraction to me.
        I am trying to set one up – but not equal weightage across the investment types. I post something around it recently ๐Ÿ™‚

        Liked by 1 person

      2. Hello Warriortan,

        I beg to differ when you say that this is an invest and forget tool. In fact, I think it might be even more important to invest more time and effort in the beginning when you have to do rebalancing, since ultimately you will need to have at least a basic understanding of all 4 segments of your investment, so that you can decide what to buy/sell and what not. Unless of course, you are providing even more diversification within your portfolio say buying ETFs or mutual funds (which I think you are currently doing as so I’ve read from your blog), which begs another question if you are over-diversified.

        Perhaps the limits of diversification could be defined here. And maybe, diversification within diversification may not be all that bad if it provides a fail-safe investment since there is supposedly little correlation between all four segments.

        If you mention that there is only a need to do the rebalancing once a year, then I guess that would probably still be relatively passive.

        Since it is working for you, and you are able to benefit from this approach, please continue blogging so that I can know the progress of this approach, and how it can be useful. :p And thank you for sharing this concept of “Permanent portfolio”! Definitely blog-worthy and I’ll probably feature you when I decide to write an article about this.

        Cheers!

        Liked by 1 person

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