Gold Trading Boot Camp: How to Master the Basics and Become a Successful Commodities Investor

CHAPTER 36

Diversity

Assuming that you’re not investing 100 percent of your trading stake, or personal portfolio, in gold, and you’re involved in other markets and investment vehicles as well, I can proceed from the top-down perspective.

First, I break down the portfolio by class, assigning the following major categories:

• Foreign Exchange.

• Fixed Income.

• Stocks.

• Metals.

• Energy.

• Agricultural Commodities.

And then, separately, in a brand-new universe, I also classify exchange traded funds.

There is cross-pollination as the stocks category can overlap with the bullion mining shares. To reconcile this, I categorize all the petroleum and metals equities within their respective class (energy and metals), and thus outside the stocks classification.

As for the exchange traded funds (ETFs) arena, I am excited about the prospects for continued growth and expansion in the application of these products. The ETFs offer average investors the opportunity to diversify and become far more selectively aggressive while maintaining a low volatility, return-seeking, portfolio approach.

An investor can effectively buy or sell gold as a stock market transaction, through the gold (and silver) exchange traded funds, of which there are already several choices.

It is important to understand that not all exchange traded funds can be redeemed physically for the underlying metal, despite the claim that ETFs are all backed by the raw material. They are not all backed by metal that is transactionable. In ...