Insurance

Over the last 10 years gold has regained it's popularity as an investment. Gold is one of the only investments that has maintained it's value over the very long term, 100 plus years. There are several reasons for this and there are several reasons to own gold as a long term investment in your portfolio in the future. The following are 5 reasons to consider owning gold in your portfolio.

1. Gold Is Insurance

If you live in Florida and take out a homeowner's insurance policy to protect you against a hurricane, you hope that you never have to use it. Gold ownership acts in a similar way by protecting you against financial collapse. Just like the premiums on homeowner's insurance rises as after a catastrophic hurricane, the premium on gold ownership rises after financial crisis. Gold protects or insures you against the acts of central banks, political and economic uncertainty and civil unrest. Most importantly gold is one of the only assets that can preserve your wealth during a global currency crisis where all paper (fiat) currencies lose value.

2. Gold Can Not Be Printed At Will

The "shelf life" of fiat currencies is historically somewhere between 50-100 years. Simply put, fiat currency regimes come into existence and go out of business over time. The main reason is due to the fact that the central banks of a sovereign government can print the currency until it ultimately looses it value. This is known as inflation and is the main reason that movie ticket that now costs $10, used to cost.50 cents. Physical Gold on the other hand, cannot be printed by Central Banks "out of thin air." On the contrary, physical gold has to be mined out of the ground, a process that can take more than 10 years. Because gold cannot be inflated or printed like paper currency, gold's value is maintained during times of rapid fiat currency depreciation, as is the case in 2010-11.

3. Gold Protects You From Counter Party Risk When you hold a gold coin or bar in your hand, you don't have to worry if the financial entity that is gold is going to pay you. On the contrary, when you purchase paper assets like stocks or bonds, you are automatically exposed to counter-part risk. What happens if the company you own bonds in goes into bankruptcy, experiences accounting fraud or is simply managed poorly? These are all examples of counter-party risk and another reason to own gold in your investment portfolio. It should be noted that gold is a very volatile market and that gold ownership should come only after personal due diligence and a written out plan, like dollar cost averaging to avoid buying at cyclical tops.