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Are Bitcoin and Gold Good Investments? – Forbes Advisor Canada – Forbes

Gold and bitcoin are weird.

Neither is especially useful in the here and now in any practical sense. Bitcoin’s promise as a deregulated digital currency remains just that—a promise. And nobody carries around …….

Gold and bitcoin are weird.

Neither is especially useful in the here and now in any practical sense. Bitcoin’s promise as a deregulated digital currency remains just that—a promise. And nobody carries around gold in their hip pocket to purchase goods or services anymore.

While both are “mined,” their only real-world or virtual applications seem to be as tools of pure speculation—or as safe-haven assets. Whenever the world goes half a bubble off plumb, people flock to gold. More and more, they also seem to flock to bitcoin.

The price of an ounce of gold and of a single bitcoin were affected by Covid-19. Both prices bounced dramatically after governments and central banks around the world pumped money into consumers’s wallets (and banks’ coffers) in response to the global recession.

Many investors are unsure what place, if any, either asset has in their portfolio. Here’s what you need to know to understand how bitcoin and gold might fit into your investment strategy.

Gold Isn’t Much of an Inflation Hedge

First, the bottom line: You can add gold to a well-diversified portfolio of stocks and bonds, but experts believe it shouldn’t amount to more than 10% of your holdings.

That said, it’s important to know why you’re adding gold to your holdings. If it’s to fend off inflation, think again. While research shows the value of gold remains constant over a very, very long period—like a millennium or two—it can’t really be counted on as a store of value over a more modest time period. It’s simply much too volatile.

In fact, gold is as volatile as the S&P 500, says Duke professor and senior advisor to Research Affiliates Campbell Harvey, and its returns don’t generally beat returns from the broader stock market over the long term.

So Why Should You Invest in Gold?

Gold is better understood as a safe haven that investors embrace when times get soupy. For instance, in late 2018, the S&P GSCI Gold Index gained 7.2%, according to Morningstar data, while the stock market declined nearly 14%.

But gold volatility can go in both directions. Almost a third of fund managers polled in the August 2020 Bank of America Global Fund Manager Survey stated that they believed that gold was overvalued—the highest this sentiment has been since 2011, and up from 0% the month prior.

To put that in context, SPDR Gold Shares, a popular gold exchange-traded fund (ETF), gained 9.6% in 2011 and then 6.6% in 2012, before losing 28.3% in 2013 and then delivering negative returns the following two years.

Gold, then, should be treated as hot sauce …….

Source: https://www.forbes.com/advisor/ca/investing/are-bitcoin-and-gold-good-investments/

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