Ron Swanson’s Gold Bars
So, what is the problem with this strategy then? Other than the insurance nightmare and the fact that you literally have all of your wealth buried in your back yard, there are two little things you are missing out on: the compound effect, and diversification.
Why are they important? One of them helps you get rich quicker, and the other one reduces your risk as you do.
Unless the gold bars are mating underground, I dare say Ron cannot count on the compounding effect.
Diversification on the other hand means that you are spreading your risk amongst an array of different investments, sectors, locations, etc. The possibilities for diversification are almost endless. If Ron’s back yard is robbed, all his wealth is gone. The equivalent is having all your money in the share market, then it crashes, and so does the entirety of your wealth.
If you were diversified, you would probably hold shares, but when they are tanking, you could also have Term Deposits, Bonds, Property and other investments holding up their end of the bargain, so it isn’t so much of a blow to the guts.
Again Ron, no diversification with your gold bars strategy.
So, for those who are doing a Ron, and stashing gold and silver bars in your sock draw, you may want to reconsider this strategy.
If you still want to invest in gold, that’s ok, you can. There are certain Managed Funds, ETFs or listed investment companies that have a percentage asset allocation to gold. As the old adage goes, don’t put all your eggs in one basket.
– This post is from our resident senior financial planner, Cara Brett. Check out her details in our about us page.