Should You Buy Gold?
InvestingWith interest rates climbing and the stock market becoming more volatile, interest in owning gold is increasing. Should you on some? And if so, what’s the best way to own it?
Subscribe to our Podcast!
Contact Steve here:
https://calendly.com/stevewershing/inquiry
Full Transcript below:
00;00;00;00 - 00;00;26;01
Unknown
Welcome back to 30 Minute Money. It's a podcast that delivers action oriented, smart money ideas and bite sized pieces. I'm Scott Fitzgerald at Roc Vox Recording and Production live stream studios here in Bushnell's Basin, just outside of Rochester. I've got Steve Wershing with me from Focused Wealth Advisors. You say live stream there. I don't see any water here anywhere.
00;00;26;01 - 00;00;44;18
Unknown
Where is the stream? It's a creek. It runs a river, runs through it. there it is. Nice to see you again here for the bad jokes. Yeah, right. Welcome to dad. Joke. I have. So today, today we're going to talk about gold. Yes we are. Should we buy gold? Should you buy it? And we're going to talk about it.
00;00;44;20 - 00;01;00;29
Unknown
And and we got to talk about silver too. We can talk about silver. Can we talk about silver? Because I remember I saw this video and somebody was talking about how because, you know, it's on the internet, it's true. It's got to be this link and said in it, yeah. You, you talking about like the future is in silver.
00;01;01;05 - 00;01;18;18
Unknown
Right. And I've been hearing that for 15 years now. So I'm wondering when the future's going to arrive. But anyway, I got one word for you, Scott. Gold. Plastics. Oh, plastics. Sorry. That's a really old reference. Get in on the ground floor. yeah. I'm telling myself now. Right. He's going back to the graduate. What year was that?
00;01;18;24 - 00;01;43;14
Unknown
1960 something. 98. The seven. Somewhere in there? Yeah, a few years before where I was born, but. Right. Don't don't remind me. So anyway, yes, we're going to talk about buying gold. We can throw a silver in there too, if you want. And one of the reasons I wanted to talk about this is that Costco has been making headlines because they have been selling gold bars, and so people have been really.
00;01;43;15 - 00;02;04;07
Unknown
Yeah, that people buy a whole bushel of gold bars. I don't they call it bushels. Yeah. You can buy a big tub of mayonnaise and gold bars. Exactly. Okay. You got to buy in bulk. It's Costco. Yeah. So say it. You got to buy a hold. You know, $15,000 worth of. That's right. Yeah. but because, you know, that's help.
00;02;04;09 - 00;02;19;29
Unknown
That's helped bring it back into the public consciousness. And more people are interested in this kind of stuff. And now that you can buy at a Costco, you know the questions on people's minds. Hey, should I buy some more gold? so we'll talk a little bit about that. Now, there are a number of reasons why people buy gold.
00;02;20;01 - 00;02;43;05
Unknown
it's considered a safe haven. so when people get nervous about the economy, when they get nervous about politics and that kind of stuff, a lot of people turn to gold. I don't think it's a great thing for that. It's it's record on that is not not hugely consistent. It if you're if you're worried about the collapse of the economy, gold is not what I would want.
00;02;43;05 - 00;03;01;09
Unknown
I would want tuna in oil because I could eat the tuna. I can burn the oil for fuel. I if I could do something with it, if I got a big bunch of gold bars and the economy collapses, what am I going to do? Yeah. anyway. But people. But it's a it's a reaction that people have, and people tend to buy gold for that reason.
00;03;01;09 - 00;03;20;25
Unknown
And people also use it as inflation hedge. and sometimes that works. It's kind of funny. It's, it's I almost consider it kind of an urban myth because it's record on hedging against inflation is really not that great. It's, you know, there are some periods of time when it's terrific, but it's not a it's certainly not a perfect hedge against inflation, but that's why people buy it.
00;03;20;25 - 00;03;56;02
Unknown
And so, you know, so I figured since it was back in the headlines that we should, we should talk a little bit about it and talk about whether it makes sense to have some gold in your portfolio. All right. Well, so, let me just talk a little bit about how we build portfolios. you know, we we, follow Roger Gibson, who is a, an investment, professional in Pittsburgh and literally wrote the book Asset Allocation Balancing Financial Risk, which is I want to say it's in his fifth edition now, and it's been around for a long time.
00;03;56;04 - 00;04;14;03
Unknown
And it's and it makes a lot of sense. And one of the things that he talks about, you know, we all know about we should diversify. We should have these different things working in our portfolio. And his big question was, well, what are the right things to put together to get the best kind of outcome over time? And what, on the equity side.
00;04;14;03 - 00;04;31;24
Unknown
So there's equities and there is income and, you know, people talk about 60, 40 mics and that kind of stuff. And what they mean is stocks and bonds. But we're going to expand that a little bit into equity and income. Because equity is anything that you can own. So it actually goes beyond stock. So when people say equities they usually mean stocks.
00;04;31;24 - 00;04;52;29
Unknown
But equity includes other things. And in Gibson's research what he found was that there were two things that add to the value there in the portfolio. And that's real estate and commodities. So he considers that part of the equity side of the equation. And commodities in particular, which is gold is a commodity. Commodities is just the building blocks of the economy.
00;04;52;29 - 00;05;16;06
Unknown
So all the raw materials, so precious metals, industrial metals, oil and gas, pork belly, pork bellies, going back to trading places. Exactly. I know everything I know about commodities from, Winthrop and the Dukes. Oh, sure. Like he went to Harvard.
00;05;16;09 - 00;05;42;06
Unknown
So what I say about you all the time, I'm sure, like Scott went to Harvard and he stepped on the ball. but anyway, but what? You know, but it's interesting because, you know, commodities is the lowest return, highest risk thing. And in that he, he brought it down to four, four different things. Us stocks, foreign stocks, real estate and commodities and commodities is the lowest return, highest risk thing in that whole mix.
00;05;42;06 - 00;05;59;26
Unknown
And so a reasonable person might look at that and say, why on earth would you ever put commodities in a portfolio. It's the lowest return, highest risk thing you've got in here. And if you think about it, it does. It makes sense that commodities would not necessarily have a great long term return because the long term is probably inflation, right.
00;05;59;26 - 00;06;22;02
Unknown
That's kind of what inflation is. but the answer to that is that it is, it's what happens to it in different economic situations. Is, is is the least connected with stocks as anything. And so it's got what we call the lowest correlation. And many people think well I you know I'm diversified. I've got stocks and bonds.
00;06;22;02 - 00;06;42;08
Unknown
Well you know actually stocks and bonds are a lot more correlated than people think. So you can you can get diversification by investing in stocks and bonds. But if you add something like commodities it gives you a much bigger diversification effect. If you tell me what stocks did last year, I can give you a pretty good guess within a range about what bonds did.
00;06;42;10 - 00;07;02;27
Unknown
If you tell me what stocks did last year, I got no idea what commodities did because the correlation is practically zero. And so it's kind of an interesting thing I love this is one of the fun things about investing is, you know, you can take a really high risk investment and add it to a portfolio, and it lowers the risk of the portfolio stuff because it's really uncorrelated.
00;07;02;27 - 00;07;20;02
Unknown
And that increases the diversification effect. So that's the long term argument for having things like commodities in the portfolio. So typically our portfolios it's not a lot. It's a little 5 to 7% maybe might be in a portfolio. But that's why we add that little bit in there. Because that way when stocks go down we've got something else.
00;07;20;02 - 00;07;41;07
Unknown
We can pull money out of and put back into stocks when they're low and get, you know, a better, better, more consistent return long term. And so gold sort of fits into that gold sort of fits into that category. you know, within the last in the last year, we've had a little bit of gold, we've had a little bit of agriculture, we've had a couple of different things that that go in there.
00;07;41;10 - 00;08;00;20
Unknown
And right now we're looking at potentially swapping out the agriculture because it's trending down a little bit and putting more of the industrial metals in there. So copper and and iron and, you know, some of those kinds of things in the portfolio. But, but, but the idea is that it's a good thing to have a little bit of commodities in your portfolio.
00;08;00;20 - 00;08;21;09
Unknown
Now, does that mean that you should go to Costco and buy Gold Bar? No, no probably not. I mean, I'm not going to say it's a bad idea to go if you are, but go buy some. Great. But it's it doesn't make sense necessarily as part of of a, of an investment strategy because buying them, buying the metal itself has some problems.
00;08;21;11 - 00;08;45;02
Unknown
I shouldn't say problems. It has some complications. First is it's a physical thing you got to protect. I mean, you could lose it. They could get stolen, you know, at the you know, you've got to you've got to you got to protect it. Right. And so that's that's may not be a big deal, but but it's a deal a bigger deal is that, integral in the way that you can buy gold.
00;08;45;02 - 00;09;05;28
Unknown
There's more to it than just the value of the metal. So for example, a lot of people buy gold coins as a way of getting gold. Okay. Well, so there's the gold value, but then there's what we call the numismatic value. There's the the coin collecting value of that. And that adds value to it. But it also that value can go up and down.
00;09;05;28 - 00;09;23;22
Unknown
So now you've got another variable besides the value of the metal itself. Plus you've got to keep track of it. Plus you've got to go, you know you've got to have a trusted relationship of somebody that you can go to to to evaluate it for you because. Right. You can't always necessarily trust those folks. Some of them want to take you for a ride.
00;09;23;22 - 00;09;55;27
Unknown
And so you've got to be careful about that. So having having the metal itself has has some complications and has some difficulties. That's what I always I always thought when, when people were talking about investing in gold and silver and stuff like that, and you see the commercials where the, you know, the Silver Eagle or the Gold eagle commemorative coin, but yeah, you know, the day that you want to cash that in and you go to Joe's coin and gold, you know, buying place on the boulevard there and he's like, oh yeah, this thing, you got to take it for a ride.
00;09;55;27 - 00;10;10;15
Unknown
This isn't worth anything, you know. That's right. So you got to go to 4 or 5 different guys to get the best opinions. Exactly. And and it's really, you know, it's really I mean, you know, if you're in that and you do that, then you come to know who's got a good reputation, who doesn't. But if you don't, yeah.
00;10;10;18 - 00;10;28;27
Unknown
You know, you're just prey, you know, I mean so so it becomes more complicated. The other thing and this is you know, maybe the most important thing is that, you know, the what makes diversification work is rebalancing. And so you want to rebalance at least once a year. You want to rebalance sometimes when the market goes up and down a lot.
00;10;29;00 - 00;10;50;16
Unknown
And if you've got physical gold, how do you rebalance that into stocks? How do you take 20% of that and move it back into stocks? It's really hard. So we use securities to do that. We use exchange traded funds and mutual funds that may invest in gold or silver or other kinds of metals because they're liquid. You know, if, if I, if I decide I want to decrease my gold position by 5% today, I put it in an order, it's done.
00;10;50;22 - 00;11;07;26
Unknown
No problem. I don't have to worry about who I got to trust. I don't have to worry about where I've got to take it. You know? I just get on my computer and do it so, and those prices are based strictly on the price of the metal on, on the open market. So we don't have any additional things complicating that valuation.
00;11;07;29 - 00;11;28;22
Unknown
So, you know, I'm a big fan of having a little bit of commodities in a portfolio. And that might include gold. It might include silver. You know, I'm hearing the same kinds of things about, oh, well, silver is undervalued. And you know, it's you know, gold gold has is mostly a precious metal is mostly because of its collectible value.
00;11;28;25 - 00;11;51;02
Unknown
it has some industrial applications. Silver has more industrial applications. So silver has both of those markets that it can go to. And I don't have a particular opinion about where gold or silver is relative to its cycle, or if it's high priced or low priced, but it's something that we do include in the portfolio, and we do that based on the relative strength of of that compared to other securities.
00;11;51;04 - 00;12;07;13
Unknown
And so it's a it's I think it's a it's a good way to include it's a good thing to include in your portfolio. over time yoga. You can also put these mutual funds in exchange traded funds version of goals. You can put in any kind of account that you want to. So if you want to put it in your IRA, great.
00;12;07;16 - 00;12;27;11
Unknown
How do you put a gold bar in your IRA? Oh, I, I don't even know. So so I like to see that atm. Exactly. I'm trying to stick this thing, this gold bar into the ATM now, but the, you know, so I think, I think gold and other commodities is a good thing and very small doses to put in a portfolio.
00;12;27;13 - 00;12;41;13
Unknown
and we would do it using securities to do that openly, frequently traded kinds of securities as opposed to things that are harder to trade and harder to rebalance and that kind of stuff.
00;12;41;15 - 00;13;16;09
Unknown
Your retirement is at risk, not from the stock market, not from inflation. Taxes are putting your retirement at risk. I'm certified financial Planner Steve Worthing and I specialize in helping people create low tax retirement. Unmanaged taxes can take 30, 40, even 50% of your retirement income. Learn how to defend yourself against excess taxation. Our complimentary webinar. We'll cover all the principles you need to know to protect your money for you and your family, and keep it away from the government.
00;13;16;11 - 00;13;37;23
Unknown
This free webinar will cover how taxes are different in retirement. The taxes you pay in retirement that you don't have to pay during your working life. How to move tax savings into a tax free environment. The widows tax, the Secure act, the Secure act 2.0 and what they mean to you. The webinar is free, but you have to register to save your spot.
00;13;37;23 - 00;14;07;12
Unknown
So go to Focused Wealth advisors.com/webinars and find out more and sign up right there. Even if you're not planning to retire for the next 5 or 10 years, this information will be critical for you. The longer you have to put the strategies into effect, the more you can accomplish. That's focused wealth advisors.com/webinars to find out more and to sign up today.
00;14;07;14 - 00;14;30;26
Unknown
Now I'm going to cut out all my gold teeth in melting down. for I don't have any teeth. You know, I really don't. What's your 30 minute action item 30 minute action item? How much of your portfolio is in commodities? And I keep talking about it. Pork bellies are the way to go. I'm just kidding. thanks again for watching and listening to 30 Minute Money, three Minute Money on all the podcast platforms.
00;14;31;02 - 00;14;58;09
Unknown
Steve Wershing can be found at FocusedWealthadvisors.com and I'm at RocVox.com. Thanks again. We'll catch you next time on 30 Minute Money.