by James Rickards
[…] These quotes illustrate the perennial challenge that investors face in deciding what role gold should play in their portfolios. Few understand how to value gold, and even fewer understand that gold is not really an investment — it is money. Of course, if you want a portfolio that preserves wealth, money is a good place to start.
Saying gold is not an investment may seem strange, especially since I recommend some gold in an investor’s portfolio. To illustrate this point, you can reach into your purse or wallet and pull out a dollar bill. You think of the dollar as “money,” but you do not think of it as an investment.
An investment has some element of risk, and typically has some yield in the form of interest, dividends or rent. Money can be turned into an investment by using it to buy stocks, bonds or real estate. But as a dollar bill, it is just money; it has no yield and will still be a dollar tomorrow or next year.