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Investment Goals and Strategies
The intended end result of investing is to make and keep money. The investment goals and strategies that one uses in accomplishing this goal are many. However, the first rule, to quote Warren Buffett, is not to lose money and the second rule to continue quoting the Oracle of Omaha is not to forget rule number one. Sound investment goals and strategies should also include fundamental analysis of the investment to ascertain intrinsic value of stock and margin of safety. In the background inflation eats away at the purchasing value of investments so smart investors diversify their investments with the likes of secure dividend stocks, growth stocks, real estate, treasury bills, and even international investment strategies. Looking towards the remainder of the 21st century what are sound investment goals and strategies consistent with the goal of increasing and retaining wealth and purchasing power?
Gold, Fiat Money, and the Price of a Quart of Milk
Investing in gold was a great idea for most of the first ten years of the 21st century. It was also a great idea for much of 1970′s when inflation was rampant. Gold bugs firmly believe that paper money will eventually become worthless and as of a year or so ago were predicting $3000 an ounce gold. In 2011 gold surged over $1,800 an ounce and today goes for around $1,200 an ounce. As the US stock market surges the prospect exists of an ounce of gold going for less than $1,000 an ounce. The demise of the US dollar is a recurring prediction. However, the US Federal reserve promises to cut back on the $85 Billion a month quantitative easing stimulus program. When this happens interest rates will rise in the USA and the dollar will trade higher against foreign currencies. And gold will go into a tailspin. Gold bugs continually talk about the purchasing power of an ounce of gold. Well, the purchasing power of gold has fallen by a third in two years breaking the rule of good investing goals and strategies of not losing money.