Saturday, July 2, 2011

Gold as an insurance against financial armageddon

Hey friends! Recently, I realised I have not been blogging about investing. So, I will like to share something I did before starting on my dividend investing path in 2009. 

Just a quick recap in case you are visiting my humble blog for the first time. I used to have a phobia of stocks, thanks to constant "scare tactics" and "brainwashing" by my conservative parents (who went through the Asian financial crisis). When Lehman Brothers' collapsed and the financial markets nosedived, I felt really relieved that I was not part of it. I just read the financial news everyday for fun and amusement. I even laughed at the plight of those greedy American banks. 

The Fed started QE1 and TARP. The US dollar depreciated. H1N1 was ravaging the global economy. There was extreme fear in the world markets. The world was on the brink of financial armageddon. So what did I do? I did something strange. Instead of picking stocks at historic low prices in March 2009, I bought 2 gold coins. o_O" I thought "Gold will always have value but currencies can become worthless overnight."

I bought the gold coins at the UOB main office. There was no queue at the gold-selling counter. People queueing up at the other counters were looking at me in a weird way. Hahahahahaha. They were stealing glimpses at the gold coins while I was choosing which ones to buy. Even the bank teller who was serving the queue beside me was fascinated by the coins.  But the female bank personnel serving me was rather nonchalant. Maybe she sees gold coins everyday until sianz liao. Or she can see but cannot take, even more sianz. Lol. The best part was that I was only wearing a cheap t-shirt, bermudas and sandals. Muahahahahaha! I dunno why, but I felt embarrassed. 

Half ounce Canadian Maple Leaf gold coin (~S$870, inclusive of GST)
Almost the same size as the 50 cent coin beside it. 

Half ounce Australian Kangaroo gold coin (~S$900, inclusive of GST)
The gold coin is much heavier. I can actually feel the weight on my hand!

I wanted to have a little insurance against financial armageddon. Experts suggest having 10% - 15% of one's portfolio in gold. For me, gold makes up about 2% of my portfolio. The price has increased quite a lot too. By the way, I love how the gold coins glitter. I can spend a good 10 minutes admiring and staring at them every day. I really dun know why. But I feel good and also a little more secured with some gold in my possession. Maybe there is really something special about gold that captures people's eyes and hearts.

So, do you have any gold in your portfolio? If yes, why? If no, why not? Comment below. ^^

Peace Out,
Dividend Warrior


Musicwhiz said...

All that glitters may not be gold! Gold does not yield dividends, and therefore does not constitute an investment for me. The idea is to buy at $X and hope to sell it for $Y, where Y > X. To me, this seems like a game of musical chairs (i.e. speculation).


JW said...

Gold isn't meant as an investment tool to give dividends.

It is meant as a safeguard against fluctuations of currencies. It's a form of savings.

Anonymous said...

why not buy gold necklace, can wear it also???

Dividend Tech Warrior said...

Hi Musicwhiz,

I bought gold before I started dividend investing. It is more of a form of insurance. Btw, the price of gold has been increasing. With all these huge national debts countries have, I feel it is good to have a little gold.

Dividend Tech Warrior said...

Hi JW,

Yup, gold does not provide dividends. I bought these 2 coins before I started income investing. However, no harm having a little gold. Even central banks around the world have gold reserves in their vaults. ^^

Dividend Tech Warrior said...

Hi Anonymous,

I prefer 99.9 purity gold.

FoodieFC said...


I wonder how much would a gold bar cost!The gold coin is already at close to $1000.

When gold rises then how/who do you sell it to, to earn a profit?

Anonymous said...

bling bling

check it out!

Anonymous said...

better hold gold bar than coins. and better to save in the safe deposit box rather than in the house?

Dividend Tech Warrior said...

Hi FoodieFC,

A gold bar will cost a bomb! Lol.

I dun really intend to sell any time soon since it is just only 2 coins. I will probably sell to the pawn shops or back to UOB.

Dividend Tech Warrior said...

Hi Anonymous,

Bling Bling indeed. Heh! ^^

Dividend Tech Warrior said...

Hi Anonymous,

I dun have the funds to buy gold bars. I am storing the coins together with my Mum's jewellery in a safe.

Anonymous said...

Hi Dividends Warrior,

I used to be lured blindly by dividend yield from 2005-2006. It was until 2007-2008, I realize that the quality of the company is more important than anything else.

Looking at some of your holdings, it may trade at high yield currently, however during the downfall, these holdings can fall drastically and all your dividend collected will not make that much sense anymore as the capital loss is too huge to cover up the dividend gain.

Having said that, some of your holdings are great companies with strong cashflow and some are even a growing company which you can safely buy-and-hold for many years. However, the price you paid seem a little high.

Having a portfolio yield at about 5% can also mean you are paying a reasonably higher price for the share you own.

Back in 2008-2009, you can grab these at yield of 10% or even higher.

Next crisis would be a good chance to purchase and hopefully you got enough cash for that.

Good luck.

josh said...

@ anynomous

so what is the best to invest now if you said now the price is high? I expect STI will be 6000 before the crisis

Dividend Tech Warrior said...

Hi Anonymous,

Thanks for the reminder. U r right, I must not be blindly chasing yield.

I am also saving up for the next crisis.

Cheers! ^^

Anonymous said...

Investment has to be done in proactive way. I have 10 pieces of 1 oz gold coins bought when gold price was around $550 an ounce.
I believe gold price has yet reach its peak simply because of the US and Europe financial situation.

Newbie said...

Extreme Power said...

yup. Good to collect. I keep about 10Oz.

Penny Stock Blog said...

I can see the value of owning some gold directly.

Penny Stock Blog said...

I can see the value of owning some gold directly.

Anonymous said...

hey divident warrior. I like your blog and i have been reading it for a while now. very informative and educational for young investors like me.
Buying previous metals is the safe thing to do now. the Feds are printing more and more dollars to get out from their debts, and god bless them if USD does not end up like Riechmarks or Zim dollars. its time that the usual cliche of 'allocate 5 percent of your portfolio on PM' be chucked away. Im aiming at 20%. when the time is right, ill probably reduce it back to 10 and use the money to get some dividend stocks.
hoe much of your portfolio is allocated for PM? i like to know that.

Dividend Tech Warrior said...

Hi nigelthesensei,

Right now, the combined value of my Singapore dividend portfolio and Global dividend growth portfolio is about S$125k.

I have about 5k worth of gold. So my precious metal allocation is 4% of my portfolio. I might be buying a dragon gold coin this year.

lavender said...

Hi, will you be stocking up on gold now since the prices have fallen?