Nobody likes a party when it ends. But like parties at your dormroom or in you neighborhood’s block, the current stock market party, like all parties, will eventually end.
It may often seem like the party will continue to go on forever but the reality is that what goes up will come down. This is true with physics and this is definitely true with financial markets.
Regardless of which equity’s market you’re playing, you will have to contend with the reality of a possible market crash. Markets eventually reach a certain stage where the people who were pushing values upward lose their appetite for risk, reconsider, diversify, and the market crash happens.
Specific triggers vary from different historical periods but it all boils down to one thing: loss of confidence. Whether we’re talking about the Dutch Tulip mania of the 1600s to the first Dot Com crash of the early 2000s to the most recent financial crash in 2008, it all boils down to a loss of confidence.
There is a trigger event and everybody starts taking a reality check. This is followed by a market crash. If you want to protect yourself in the event of a market crash, one of the best moves you can make is to invest in gold coins.
The main reason why gold coins are great investment vehicles is that during a market crash there is always a mad rush to financial safety. People will predictably drive up the price of precious metals like gold, silver, platinum, palladium and commodities.
It is not uncommon to see the price of oil spike up during a market crash. In certain historical periods, most notably in the 1970′s, it was the stock market that crashed while inflation spiked up. This is the hallmark of stagflation. In all these circumstances, precious metals like gold and silver are great places for financial safety.
Regardless of how badly inflation beats up the US dollar, the price of gold will always keep up. When people are rushing for the exits, they always run to the safety of tried and proven investment vehicles. Precious metals are one of these.
While there is an initial rush where the price of coffee, cotton, wheat, gold and oil spikes up, once the depressed market settles down, there is a filtration process with commodities. This took place in the wake of the 2008 crash where certain commodities which were initially bid up started to crash.
The reality is that even within “safe commodities” there is a fixed hierarchy of value. This is crucial for you to know when you’re trying to protect yourself during a market crash. Again, the patterns of value filtration are quite predictable.
Commodities across the board, from pork, to beef, to coffee, you name it, tend to spike. But after a few months, some of these commodities will start crashing. You have to remember this pattern because you don’t want to get caught up on the losing end of commodities’ market filtration.
You might want to ride a basket of commodities up and then cash out after you’ve hit your percentage appreciation targets.
With commodity filtration firmly in mind, it is worth noting that gold has enduring market appeal as a perpetual safe haven. Whenever the stock market experiences jitters, people always think of gold.
Gold is like the default trigger reaction people have in terms of market uncertainty. This is a crucial piece of information to know in light of commodities filtration. Why? When certain commodities start crashing, gold is always the last.
If you don’t want to ride the commodities market up, you may want to save yourself a lot of grief by buying gold coins outright instead of buying a basket of commodities as a response to a market correction or an outright market crash. Why does gold have an enduring market appeal as an investment safe haven? Keep the following factors in mind.
Regardless how the people feel about the shiny gold medal, either as jewelry or as a traditional store of value, gold has an actual base market value as an industrial raw material.
A lot of electronic items and industrial goods require gold as a raw material. Some industrial processes require gold This is very important to know because when you are trading precious metals, you have to establish a base value. In other words, the value of the investment vehicle isn’t just relying on speculative value or how the market feels.
Instead, there is a bedrock value established by the actual market demand for that assets’ industrial usage and gold definitely fits this criterion quite well.
The great thing about investing in gold coins is that it is a ‘twofer’ investment. In other words, you get a two-for-one value. Not only are gold coins obviously made up of valuable gold with its own intrinsic base metal value, (measured in light of varying alloy compositions), but it also has collector value.
You can benefit from gold coins as investment not just in terms of their base metal value which helps you stay one step ahead of inflation or stay afloat during market corrections, but also in terms of value appreciation due to the fact that they are collectors’ items.
You get two layers of protections with gold coins when most other investments don’t give you that level of protection.
It is very easy for half of your portfolio to evaporate in the wake of a market crash. In fact, in 2008, many mutual funds saw their net asset value vaporize almost overnight.
The good news is, gold coins and gold investment help you position yourself in such a way that you can effectively regroup during crashes. The typical investor psychology during crashes is to head for the exits, sell everything and take massive discounts off their massive values. While there is some strategic advantage to this, on the whole, it is a losing proposition. On the whole, you are basically consigning yourself to taking a steep loss on your asset appreciation. Essentially, you reduce yourself to a waiting game.
You will be just waiting for enough time for you to pass. Once the market recovers its bearings, you then reinvest so you can recoup your losses. If you diversify into gold coins and gold investments, you put key part of your assets into investment instruments that would retain their value when the market crashes.
This is extremely important because they effectively shield a large portion of your net worth or your investments total value from the ravages of market crashes. This is a key strategic advantage to have compared to stock-only investment portfolios. In those situations, you are pushed into a posture where you would have to wait for the market to recover enough for you to start putting into play your asset recovery strategy.
With gold coins and gold investments, on the other hand, you have assets that you can cash out immediately. Gold’s prices are posted daily and you know exactly how much capital you can work with. In short, gold coins are liquid assets that help you take advantage of steep discounts of blue chips stocks and otherwise solid investments.
If there’s any advantage that you would get in investing in gold coins, it is this: the luxury of time. As mentioned above, if you park all your assets in stocks and market correction happens, you are forced to wait.
You are forced to wait for enough time to pass where the market appreciates in value. Once the market appreciates in value, you can then cash out on some positions and try to zero in on temporarily depressed stocks that have a fairly solid upside potential. With gold coins, you have the luxury of just waiting for the market to get its act together since your net asset values go up as the market crashes.
You have positioned yourself in such a way that whatever losses you may have suffered with your equities investments, they would have been offset by your precious metals’ portfolio.
This gives you the luxury of time. Even if you just break even your still in a better position than the poor souls who invested solely on worthless paper.
Assuming that you have positioned your investment in gold coins and other gold investments correctly, you should be in a situation where you at least broke even compared to other investors. This may seem like a weak or an insubstantial position to work from but the reality is that you are working with more money than other investors.
Remember, they lost their paper assets and you are sitting on solid assets courtesy of gold coins. In this position, you can actually thrive during market crashes. How? During a market crash there is a typical and predictable market pattern wherein an initial crash happens then there is a quick bounce up and then another is a solid crash.
By timing, your entry and exits into gold coins and gold investments, you can swoop in on solid appreciation of depressed assets and sell those assets once they are appreciated enough and then run back into gold. In other words, you are riding the market down and up.
The reality is, if you just ride the market on a straight line trajectory, you’re gonna have to wait several years. You don’t need me to tell you that, you just need to pick up Warren Buffet’s books to figure that out. However, the real money is made in volatility in the up and down spikes of the market. With gold coins and gold investments you can ride the market up and you can ride the market down.
Regardless of what the market does, you make money. This is the way you thrive during market crashes. In fact, according to certain studies, there is money to be made during a market crash than during bull runs. Can you imagine that?
Putting all conjecture aside and doomsday predictions, if you have investment assets, you must always diversify. You don’t want to find out the hard way the amount of financial pain you will suffer when you put all your eggs in one basket.
This is precisely what gold coins bring to the table. If you position your gold assets well enough, you can not only survive a market crash but actually make more money during that time.
Gold coins help you position yourself in such a way that you can make money whether the market is going up or the market is going down. Moreover, unlike gold buoyant or physical gold stored in a vault somewhere, gold coins also have an underlying collector value.
In essence, you get two streams of asset appreciation both from the underlying base metal value as well as the speculative value of the gold coins as collectors’ items. Be that as may, gold coins give you a distinct and strategic investment advantage many other investors don’t have.
The sad reality is that we live in a time of equity bubbles that much of the stock market appreciation being enjoyed by investors all over the world is artificial in nature. The underlying value of goods, productivity and real economy has slogged sorely behind asset evaluation.
The question of a market crash is not so much ‘if’ but ‘when’. If you are worried of a potential market crash, the best move you can do is diversify. Gold coins are always a good addition to a well-diversified portfolio.