Source: Visual Capitalist
By Mark O’Byrne June 16, 2017 0 Comments
Billionaires Invest In Gold
by Visual Capitalist
There are always lessons that can be learned from the “smart money”.
Unlike regular investors, billionaire money managers like Ray Dalio and Stan Druckenmiller are professional investors. They have entire institutional teams at their disposal, dive deep into the nuances and complexities of the market, and spend every waking moment of their lives thinking about how to get more from their investments.
They want to make money – but they also want to execute on strategies that will protect their wealth and build robust portfolios that can withstand any type of macro event.
Family Offices and Billionaires invest in gold
In recent months, some of these elite investors have turned to precious metals like gold as a part of their overall investment strategies.
In the following infographic from Sprott Physical Bullion Trusts, Visual Capitalist explain why these investors are adding precious metals to their portfolios, the underlying tactics, and the best quotes each investor has on assessing today’s market.
Why do these billionaires buy gold?
Their cited reasons can basically be summed up with six categories: wealth preservation, store of value, inflation hedge, portfolio diversification, future upside, and investment fundamentals.
What Billionaire Investors Are Doing?
Here are a few successful billionaire investors who swear by investing in gold.
Lord Jacob Rothschild
In late summer 2016, Rothschild announced changes to the RIT Partners portfolio because he was worried about very low interest rates, negative yields, and quantitative easing, saying they are part of the “greatest monetary experiment in monetary policy in the history of the world”.
His solution? Buy gold to help preserve wealth, and as a store of value for the future
If you want to be successful in investing and accumulate enough money to live a comfortable retirement, sometimes it’s a good idea to take advice from those who have experience in the arena.
Learning about sound investments from others can help prevent you from making mistakes that you might otherwise make if you try to rely on your own abilities. Lord Rothschild is a member of the well-known Rothschild banking family and the founder of RIT Capital Partners, an investment trust. The trust takes a critical eye towards the monetary policy actions undertaken by the world’s central banks, characterizing the current monetary policy stance as the greatest monetary experiment in history. Accordingly, the trust sold off equities and used the proceeds to buy gold. Given uncertainty in the economy going forward, the trust is focusing on wealth preservation, maximizing its ability to maintain wealth in light of central bank policies that in the long run will only destroy wealth.
Mr. Dalio is the founder of Bridgewater Associates, one of the world’s largest hedge funds. He has been a vocal advocate of holding gold, advocating that a balanced portfolio holds about 5 to 10 percent of its assets in gold. He is also quoted as saying that: “If you don’t own gold, you know neither history nor economics.” People who invest in gold understand that paper currencies aren’t ultimately worth the paper they’re printed on, and only gold can provide a solid financial backstop.
Mr. Druckenmiller is the founder and former president and chairman of Duquesne Capital Management, a hedge fund he founded in the early 1980s. The fund posted average annual returns of 30 percent before it was closed in 2010. Druckenmiller has been a vocal critic of Federal Reserve monetary policy and urges investors to get out of the stock markets and into gold. Even though he briefly sold gold after the Presidential election last November, he started buying gold again in December. His rationale was that gold was down in price, so he smelled a good deal. It must have done well for him, as gold has gone up around 10% so far this year.
Mr. Einhorn is the chairman of hedge fund Greenlight Capital. He too is bullish on gold. His reasoning is that President Trump’s economic agenda has no core philosophy, which will lead to greater political and economic uncertainty. That helps boost demand for gold, which will be reflected in a higher gold price. He also believes that: “Gold remains a long-term position with a thesis that global fiscal and monetary policies remain very risky.”
There probably aren’t too many people who don’t know of Jim Rogers. Even if they don’t know his prowess as an investor, they may have heard of his best-selling booksInvestment Bikeror Adventure Capitalist, the chronicles of his round-the-world trips. Mr. Rogers has been a persistent critic of the Federal Reserve System, believing it to be one of the biggest threats to the world economy today. He has also preached the benefits of gold and silver in a balanced investment portfolio for years. Currently he is looking for dips in the gold price to buy more gold to add to his portfolio.
The Benefits of Investing in Gold
When you don’t have a lot of money, you want to make as much money as you can as fast as possible. Once you have a lot of money, you want to keep that money. That necessitates a difference in investment strategies. All of these billionaires have a lot of money, and most of them manage investments for other people who have a lot of money.
They’re looking for investments that will be able to make money for them. Gold always rises in price over the long term and it often rises in price in the short term, particularly during times of financial crisis. That makes it a win-win for people looking for a sound investment. Gold also maintains its purchasing power over time. One ounce of gold a hundred years ago buys you roughly the same amount of goods it buys you today. You can’t say the same thing about paper currency. If you need a solid store of value, gold is what you want.
Gold helps to diversify an investment portfolio. So many investors think that if they invest in an index fund or hold a mix of small-cap stocks, large-cap stocks, international stocks, and various types of bonds, that their portfolio is well-diversified. Well, it’s not. Every single one of those assets is dependent on the health of financial markets. The reason these billionaires are able to maintain their wealth is because they invest across a broad range of assets. Gold and silver, other commodities, real estate, you name it – they’ve invested in it all at one time or another. Putting all your money into Wall Street’s favorites only works as long as Wall Street is healthy. A really well-diversified portfolio will include a decent amount of non-financial assets, including gold.
If you’re looking for a store of value that will help diversify your portfolio, it’s important to remember that gold isn’t a get-rich-quick investment. Yes, its value will continue increasing over time, but ultimately gold is used for wealth preservation. That is what it excels in doing. And that is why the development of gold IRAs has been such a boon to investors looking to safeguard their retirement savings.