Investors ignore warnings in volatile markets

[WhiteTara]

http://today.reuters.co.uk/news/newsarticle.aspx?type=businessNews&storyid=2006-06-17T130639Z_01_N16202732_RTRUKOC_0_UK-COLUMN-LIFTING.xml&WTmodLoc=NewsArt-C2-AlsoToday-5

Investors ignore warnings in volatile markets
Sat Jun 17, 2006 2:06 PM BST
By Svea Herbst-Bayliss

BOSTON (Reuters) - When a 76-year-old pensioner recently told Jill Schlesinger he wanted to put 10 percent of his $100,000 (54,000 pound) portfolio into gold, the financial adviser knew the latest investment craze would likely end badly, and soon.

"With each passing quarter, people became more greedy and more complacent," said Schlesinger, chief investment officer at money-management firm StrategicPoint Investment Advisors in Providence, Rhode Island. "And people lose sight of what a diversified portfolio is and what risk is."

Suddenly, investors who had never traveled beyond the East Coast of the United States were plowing money into India and Brazil and metals mined in faraway places.

Many are now suffering double-digit losses, but they won't get much sympathy from regulators because they were warned and because losses aren't yet heavy enough, according to financial advisers.
snip
"With new products like ETFs it is easy to speculate, but investors have no one to blame but themselves for any losses on a run-up they thought looked like a sure thing," said Capital Advisory Group's Smith. "The fund firms are only producing the vehicles, they are not showing anyone how to use them."

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[Vincardog]

1. How is putting 10% into GOLD not part of a diversified portfolio ?

I thought GOLD was a very conservative way to protect value. Where are the stock hawkers going to be when the crash comes?

[muriel_volestrangler]

3. The price of gold goes up and down violently

it's just that when people panic about stock prices, they often turn to gold. But if you buy or sell it at the wrong time you could lose a lot. But unlike stocks or bonds you get no income from gold. You're relying purely on other people's demand for it.

[AngryAmish]

5. Lots of gold bugs around these parts.

[teryang]

2. The central bank of England lost billions selling gold

who is more foolish? The buyer or the seller?

Perhaps the US government is a better fiscal example. Their deficit spending has resulted in gold skyrocketing in price over 5 years.

I wouldn't feel uncomfortable at all with 10 percent of savings invested in precious metals.

[WhiteTara]

4. I have a feeling that you are young enough

to be around when the market goes back up. At 96, I would think that cash would be king, but what do I know?

[teryang]

6. The article said the investor is 76

At 96 you might still wish to have gold as part of your estate. Cash is not king. That is the problem. Inflation and fiat money are what they are no matter what the age.

[murray hill farm]

7. I agree, but........

It does depend on where you are at in an age sense. I think for a few years there is still money to be made in investments and even in the stock market if one is careful and wise and also lucky. But, I also believe that there is still the denial that is predominant mostly among those in the 30 to 50 year age group. That denial that things are not going to be in the future as they have been in the past. For that age group, it has been that if you plan your life well and go to school and get a good job and invest wisely in housing and and follow all the tried and consistently true rules of successful living, that it will always be as it has been and that continued success will continue to be the way of life as it has been until now. This new reality and the acceptance of a future that is not going to follow those same rules of success in life is a hard pill to swallow..and maybe even an impossible one to conceive for that age group. For my age group (over 65), the ideal investment is not one that will make us wealthy in the future, but one that will keep us safe in the future..that future being the remainder of our lives. For us oldies, mostly we are our of debt..or able to be with downsizing of property, etc. and what we want is to just be comfortable and to enjoy life. For us, big time investing for wealth, for the most part, is not of interest. I pulled out of the stock market a few years ago..except for about 10%...which i plan to sell shortly and invest into gold, not gold shares or stock, but gold coins. Why? For security...just in case the dollar tanks completely..or so greatly to be of little value...then i could easily still sell the coins and continue to live if not in comfort, at least live and eat, etc. The concern, i think is for that age group that is between 30 and 50...and how they will continue to live in denial of what surely is coming financially...keeping head in sand until it all completely tanks...and are completely unprepared for what it is to be unemployed, nothing to fall back on, homeless. I do find that to be a frightening thought...but, hey...who listens to an old lady..ha!

[nealmhughes]

8. Speculating in gold is the same as speculating in currency.

The only time I ever engaged in spec was when I was in the UK and the pound kept falling and falling and falling... When it reached $1.10 per pound, I bought several thousand pounds from US dollars. I was living on the UK economy, so to Americans in Britain who were paid in dollars, it was a godsend.
Of course the bubble burst, and speculation no longer made sense, but all those pounds stuffed in one's mattress that were bought for only $1.10 on the pound sure made for some good eating in Edinburgh and London!
This was either 1983 or 4 or 5. And it only was a short windfall, but it made some very, very happy Americans in Blighty!
Gold is much the same. Some people prefer to keep their personal wealth in a portable and easily marketable form, therefore gold and diamonds and other gems make perfect sense when one has a questionable banking system or civil upheaval, such as in Afghanistan.
Just as much of the bulk of $100 US bills are suppoosed to be in Russian mattresses, so to the bulk of British gold sovereigns are rumoured to be in the area around the Indian Ocean, from Bangladesh to Ethopia.