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It is vital to avoid having all of your net worth exposed to any one market, especially the stock market. Other possibilities include bonds, real estate, commodities, cash in the bank and precious metals.
A good mix of these will make it more likely that your overall portfolio will grow steadily over time. Below are charts of returns for the last twelve years for three exchange traded funds, representing stocks redbonds blue and gold equity options exchange traded gold. All three show substantial returns over the period. All three have had their ups and downs, but very seldom have the downs come all equity options exchange traded gold once for all three.
Over this period, the one with the highest overall return has been gold. It appears to be on another upswing now. It is certainly never going out of style. As long as central banks have printing presses, inflation is a reality for the long term. Investors can own gold in physical form as coins or bars. They can also own gold futures, gold-based mutual funds or gold-based exchange-traded funds.
Of all these forms, there is one that has a special advantage: The lack of cash yield is otherwise a disadvantage of owning gold. The way to make an investment in gold generate cash is to own it in the form of exchange-traded funds and to periodically sell call options on those ETF shares.
There are several gold ETFs that will work for this purpose. All of them own gold equal to some fraction of an ounce for each share. The shares rise and fall in tandem with the price of gold. There is an active market in the options on GLD. Here is how this would then work out depending on where the price of GLD went in the next month:. In this way you can invest in an asset that moves differently than the stock market and make some cash flow for doing so, in addition to any long-term appreciation.
The small amount of work that is required to sell the new calls each month can be more than equity options exchange traded gold it. Selling covered calls is not limited to GLD of course. It works for any stock or ETF that has attached options. It is well worth investigating as a solid equity options exchange traded gold technique to add to your arsenal.
Disclaimer This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever.
Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter.
Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.