Today’s investment market is, by any definition, wild, hairy and unpredictable. Investment advisors and certified financial planners are often as replete with angst as are their clients. Sectors swing wildly. Bond yields are at historic lows. And historically valid concepts of diversification seem to crumble before your very eyes.
Portfolios constructed in accord with the Modern Portfolio driven concept of diversification along the Efficient Frontier haven’t produced the returns or the stability desired by clients. And the price of gold, an asset commonly viewed by traditional investment pros as an outlier and passing fancy, has skyrocketed.
Advisors are often in a quandary as to how to respond to clients who are reading or hearing about the importance of investing in gold or other precious metals as their firms may not want them to recommend these “fringe” investments…under any circumstances. Further, there was probably little course material in the CFP study curriculum to assist them in an understanding of the history of this phenomenon.
When clients have fears and strongly-held views that metals… gold, silver, copper, platinum… are not fringe but safe hiding places in this market storm, and even possible sources of significant future returns, it is imperative that advisors…YOU…have an ability to discuss this investment reality. You don’t have to take a position on metals as an investment, but you better be able to discuss the context it brings to investment decisions.
As a way to expand your understanding of some esoteric ideas currently being espoused regarding gold and to expand your position as the “trusted and knowledgeable advisor” to your clients, I would draw your attention to the following clip,of a discussion between Fed Chairman Ben Bernanke and Congressman Ron Paul on July 13. Paul raises a core issue that gold theorists hold today – that gold is a currency and not just a “tradition,” as Bernanke opines, or a “fad,” as some believe. Whatever you believe about the efficacy of gold as a portfolio holding, this interchange of ideas between Bernanke and Paul will challenge you to think through your own position and thereby make you more valuable to the clients who look to you for direction in making sense of the dialogues about precious metals that they are encountering every day.