When it comes to preserving wealth in the long term, gold may be a better option than cash. Low interest rates mean that money in the bank earns virtually nothing, and when inflation is taken into account, the value of cash may even decline over time. Gold, on the other hand, has attributes that make it a good counterpoint to traditional securities like stocks and bonds. It is seen as a store of value, and some investors view it as a hedge against inflation.
The modern currency is no longer backed by gold, and the only reason a dollar, franc or euro has any value is because people are known to accept these pieces of paper in exchange for something valuable. When it comes to structuring your portfolio, experts recommend limiting gold to no more than 5-10% of your total assets. Some investors prefer to safeguard their wealth with cash and gold reserves instead of exposing themselves to global instability. Gold is still very attractive relative to cash, so buying gold could be the right thing to do.
However, investing in gold isn't for everyone, and some investors are better off investing in cash-flowing businesses rather than relying on someone else to pay more for the metal. When analyzing a company's performance, it's important to look at its long-term debt levels and cash flows rather than just a shorter financial time frame. This will give you an idea of its ability to maintain healthy dividend payments. Legendary investors like Warren Buffett advocate buying businesses that flow rather than investing in gold.
