Gold is a solid investment product, but not everything is rosy when you make that sort of decision. Like with most things in the financial world, there are some disadvantages that need to be considered, as well. The American economy is one built on trade offs and this is especially true for investment ideas.
If there is something positive about it that makes people want to purchase gold in droves, then there are going to be some negatives that make you think twice, too. These things are real concerns, though most people agree that the advantages outweigh the negatives and they purchase gold anyway. Three disadvantages are listed below.
1. Massive growth potential is curtailed right now
Gold has seen a near meteoric rise in value over the last decade, but that has mostly been exhausted. People who make this investment now are doing it because they like the privacy of gold investment and they enjoy having something tangible in their portfolio. These people are more trying to diversify and make sure that they have covered all bases than anything else. What that means to potential investors is that gold has many strengths, but massive growth potential is not one of them. For people seeking this type of investment, it is better to look at small cap stocks or some of the high-yield funds out there.
The problem for gold in growth terms is that the market itself is highly evaluated. Everyone knows the value of investing in gold and that takes away a lot of the opportunity. In other markets, there are opportunities and sectors where people still have not discovered the potential that exists. The value of gold is likely to rise slowly in the coming years, but you will not get rich by investing in coins, bullion, or some of the biggest gold funds out there.
2. A lack of constant revenue from dividends
With many investment types, like real estate or stocks, investors can reap the rewards of their investment without having to sell their asset. This happens with dividends, which comes each month from stocks and come in the form of rent payments when you own a real estate property. The nice thing about dividend earnings is that you can take the money from those items and reinvest right back in the investment. Real estate owners take their money and put it back into the property, adding value. Stock investors typically just reinvest their dividends automatically in order to purchase more stock.
Gold does not offer any dividends. When you purchase coins, bars, or bullion, you own those items and the value is derived when you sell them to someone else. This is a downside that investors have to consider, because many of them depend upon the residuals to power further investments. Though gold provides a nice, steady, stable investment type, it does not offer this extra “perk” that is often seen a staple of the financial world.
3. Must provide physical storage space for gold
One of the things that many gold investors cite as a positive can be considered a negative by others. People who buy gold typically like to have it in hand. They do this because the entire point of gold is to have something tangible in case the system itself fails miserably. Though investors can have certificates to account for their gold ownership, this defeats the purpose of investing in gold in the first place. With that in mind, if you own actual, physical gold, you have to have somewhere safe to store it. Because gold coins are small and can be easily stolen, you cannot just leave them laying around. You have to have space in a safe and if you don’t have that, then it can be dangerous to keep gold around your home.
Most people like to have the bulk of their assets in something that is protected. This is why banks exist and it’s why people choose to invest their dollars with those banks. Keeping money and gold around the house can make many people feel uneasy, because they would stand to lose a significant amount of their investment in the case of a home invasion or robbery.
These things are disadvantages, but they can be overcome by gold investors. Most people know these things and they invest anyway, since gold provides so many other positives that are desirable in the current economy. Knowing all of the advantages and disadvantages, it is easy to assess gold’s place in a solid portfolio.
About the Author: Shaun Connell is obsessed with collecting coins — especially golden ones. To learn more, browse his gold coins blog. If you’re new to investing in gold, check out How to Buy Gold Coins.
Operating income is one of the most important aspects to consider when reviewing a business. But, what exactly is operating income? Operating income is the profit that is generated before taxes from its operations. It is also sometimes called operating profit. It is the monies that are available to the owners in the company before things like preferred stock dividends and income taxes are to be paid.
Why is it such an important figure in a business? Looking at a company’s operating income is important because it can give you insight into the overall health of a company. The reason is also quite simple. If a company does not have a lot of assets to sell off then any money that flows into the company will have to be generated from the sales of products or services. This is what will make up the operating income. And, this money will eventually makes its way to the company’s shareholders.
So, if a company’s operating income goes down there is less money to go around for owners, expansion of the business, debt reduction or any other goals management has set forth for the business. Therefore, watching a company’s operating income is something lenders and shareholders do frequently in order to judge the vitality of a company. Operating income is also used to calculate interest coverage ratio and also the operating margin.
You can calculate operating income by taking all of the gross profit and subtracting operating expenses.
A letter of credit is a document that is issued usually by financial institutions and those institutions are primarily in trade finance. A letter of credit can also pay for a transaction. This means that presenting the letter of credit will allow payment to an exporter. Letters of credit are used commonly with international trade transactions of particularly high value. These deals usually happen with a supplier located in one country and the customer is located in another.
You will also find this document used in land development. This process is used to ensure that approved public infrastructure like streets, sidewalks, storm water ponds, and the like will be built. The parties involved in the deal are usually a beneficiary, an issuing bank and an advising bank. The beneficiary receives the money. The issuing bank is the bank of the applicant who is also a client and the advising bank is the bank of the beneficiary.
Nearly all of these letters of credit are irrevocable, meaning they cannot be undone. They cannot be amended. They cannot be canceled without prior agreement between the involved parties. Once a transaction with a letter of credit has been issued, its functions are similar to a Traveler’s check or giros.
If a beneficiary wants to receive payment, a commercial invoice or bill of lading must be presented in addition to documents ensuring that the shipment was insured against loss or damages.
I do not recommend investing in individual stocks unless you know what you are doing. Novice investors are better off putting most of their portfolio in index funds. You get the same return as the market with low fees and no hassles.
However investing in individual stocks has it advantages. For one, you have different objectives than the “average Joe”. If you are fairly young, you should be able to take on more risk and invest in more volatile stocks. If you are nearing retirement, then putting more money into high dividend paying safe stocks is the way to go.
There are dozens of different things to look at once you have the stock quote. I like to look at long term charts of the stock, 1 and 3 years to see how the stock has been behaving and whether now is a good time to get into the company. The 50 and 200 day moving averages are also interesting but only if you know what to look for. If the 50 day moving average is higher than the 200 day moving average then the stock has had momentum as of late and vice-versa.
I like to then go over the last few quarters of earnings and I then look at analyst’s estimates for the next few quarters. And you can see if the company has been beating the earnings estimates of analysts over the past few quarters which is always a great sign. A company that exceeds the expectations of analysts time and time again, like Apple for example is usually very “grounded” and well run. You should make an effort to stay away from companies that have missed analyst’s expectations at least 2 of the past 4 quarters. These companies are the type that tend to over promise and under deliver which is not a good trait.
The single most important thing to look at is a company’s balance sheet if you plan on making a long term investment. If the company has many more assets than liabilities, it is in a pretty good shape financially. Having cash or “cash equivalents” is a great sign for a stock. If a company has a lot of debt or accounts payable, you might want to look for a more financially sound company. You should make sure that a company has more cash then debt. A company that has more debt than it can pay off is very stricken financially. Instead of paying dividends or making efforts to grow their business, debt ridden companies have to pay off their debt with the profits that they make.
I love when a company has a lot of cash on hand [at least 10% of its market cap]. A company with a significant amount of cash on hand can use their cash in dozens of rewarding ways. They can buy back shares of their own company, they can institute or raise their dividend, or they could buy out a smaller competitor. An example of a large company that has a lot of cash on hand is Apple [aapl], an example of a smaller company that has a lot of cash is Cogo group [cogo].
There is no one way to analyze a stock. Picking individual stocks is so hard that many professionals can not do so with much success. It is not easy to pick stocks and succeed in the long run put it is very rewarding.
I do not spend too much time trying to predict how the stock will behave in the short run like many investors try to do. I concede that I have no idea what the price of a specific stock will be in a week or even a month. I simply try to buy great companies at good prices and I try to hold the companies for as long as I can. This is similar to the way Warren Buffet invests; I’m only 50 billion dollars away from catching him in the net worth category!
This is a guest post from Evan, who blogs about the stock market and personal finance at stockinvesting101.net
As an investor and a gold owner, you need to be on the lookout for ways to sell your gold without running into a scam. Unfortunately for investors, there are many people out there who are looking to take your money just because they can. This is an unfortunate consequence of the world we live in and it’s something that you have to take to heart when you are looking for an opportunity. The nice thing is that if you are a smart consumer, you can get the gold sold without having to deal with these people. Following a few easy tips will allow for a much easier process.
It starts with common sense
Before going into more specific ways to avoid getting scammed, it has to begin with a measure of common sense. If you have purchased gold, then you are probably a pretty shrewd person. That means that following your better judgment is a good idea. If something seems fishy or does not feel right, then don’t enter into a deal. Consumers need to know that there are lots of different options for selling your gold out there. Before you hand it over and strike up a deal, you owe it to yourself to be absolutely sure about the legitimacy of the person you are dealing with. If you even suspect a scam, then walk away and find another prospective buyer.
Use the internet, but only legitimate sites
Don’t be afraid to sell your gold on the internet, but also be aware that the internet is home to many scammers. People see opportunity on the internet, so they set up elaborate ruses to lure people in. They understand that there are actually legitimate places to buy and sell gold online, so they use that knowledge to trick people into losing all of their investment. Make sure that you do research on a website before you enter. Run a search or two and find out what people are saying about that website. In addition to that, look for the security certificates and the encryption markings on the site.
It is possible for a scammer to run a site with the proper security clearance, but this should be a starting point. If a site does not have proper, professional encryption, then you don’t need to be putting your information there in the first place. There are too many good sites to run any risk with a bad one.
Look into selling your gold to a jeweler
One of the things that has become popular today is selling your gold to a jeweler. Many of the top jewelry stores around are running specials and sales where they offer market price for the gold. They will take that gold and sell it in larger quantity to bigger companies that offer a higher than market price. In this type of situation everyone wins and you get market price for your gold. Whether we are talking about gold coins or the old gold jewelry that you have laying around, this is one way to know that you aren’t going to get scammed.
On this same line of thinking, consider those people who host “gold parties”. This, too, is a new fad in the business. Many times a jeweler will team up with a person that they know to host little parties where people can sell their gold for legitimate market price. This is a nice thing because it allows folks to sell gold to someone that they know and trust. Likewise, they can sell their stuff without having to go online and the money comes to them in cash. As a gold owner, if you can find one of these parties, then you will be on your way.
Research the price of gold for yourself
Ignorance is the weapon that scammers use to trick you in this instance. If you put in the research and know the price of gold when you go to sell the items, you will avoid this type of scam. Knowing the current value of your items will allow you to understand when someone is trying to undercut the price on you. If that happens, you can just walk away and sell the items somewhere else. If you did not happen to know the value of your gold, you might be enticed to sell things at below market price.
Keeping your head about you and using some common sense can stop most of these problems before they ever get started. It is really a seller’s market today, so don’t settle on a seller unless you are absolutely sure.
About the Author: Shaun Connell is professional blogger and loves collecting gold coins for fun and profit. Don’t forget to check out his gold coins website. To learn more about selling gold coins, read How to Sell Gold Coins Online.
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