Lately, I started taking an interest in buying precious metals as an investment. I know friends at work who buy gold or silver and store it someplace like a safe-deposit box, etc. For example, I have friends at work from India and in Indian culture, gold is very important so people like to invest in gold as part of their retirement or maybe as an emergency back up. The idea behind investing in precious metals is that if things go poorly, you have some kind of backup. So, because of persistent problems with the economy, I started thinking about precious metals as a “hedge” or backup investment.
Since I don’t really own anything valuable I started getting really curious about it. You might say I was “bitten by the gold bug”. However, then I read this article by Bloomberg Magazine about the “real” cost of gold. Gold is pretty expensive anyway: 1 Troy-ounce is about $1,300 but the Bloomberg article shows that there are other costs too.
Some of the costs are financial: things like storage, insurance, etc. But some costs are are not financial. You have to worry about theft, changing prices of gold, hassle of transporting it (especially to another country), being tricked into buying fake gold, the government taking away your gold, etc. When you think about the hidden costs, gold doesn’t seem as attractive anymore.
Precious metal can still be one way to build your assets, just like the stock market, but it’s important to realize the costs too. Neither is 100% secure. Diversity is a good investment strategy, but it’s important to not let greed and the desire to get rich cloud your judgment though. My grandmother told me about some of her friends who lost money through risky investments and such, while she just carefully saved money each month.
Alternatively, you could also improve your financial situation by spending less money. Most things we eat and buy are not worth it in the long-run. Living more simply not only helps protect one from financial troubles, but gives you more peace of mind. There’s nothing to “steal”, or get seized by the government, and no upkeep.
As the Buddha taught in the Dighajanu Sutta (An08.054 in the Pali Canon):
But when a lay person, knowing the income and outflow of his wealth, maintains a livelihood in tune, neither a spendthrift nor a penny-pincher, [thinking], ‘Thus will my income exceed my outflow, and my outflow will not exceed my income,’ this is called maintaining one’s livelihood in tune.
In other words, the Buddha recommends a modest life, where one’s income and spending are balanced. A person isn’t cheap or miserly, but they don’t spend all their money either. If a person can do this, plus slowly build their savings, then they can maintain a modest, humble lifestyle and not have to worry too much about retirement. Further, they can share their wealth with others, as the Buddha suggests in the Sigalovada Sutta (DN 31):
He who acquires his wealth in harmless ways like to a bee that honey gathers, riches mount up for him like ant hill’s rapid growth.
With wealth acquired this way, a layman fit for household life, in portions four divides his wealth: thus will he friendship win.
Some wealth cannot be bought or sold. 🙂