Investing in Gold

1. to financially gain (profit) from the rapidly increasing price of gold; and
2. as a hedge (safety) against any economic, political, social or currency-based crises.

Most investors, however, are looking to both financially gain and hedge against any crises, but always tend to lean to one side of these two major gold investment philosophies.

To which side do you lean?

It's best to visualize these two general gold investment principles on a sliding scale with both extremes on either side. Then, depending on your own individual outlook beliefs, investment philosophies and style, decide where you fall on the scale. Visualize the scale something like this:

Personally, I slightly lean to the hedging (safety) side of gold investing but still, of course, want to to make a lot of money along the way. I would put myself somewhere around the fifth dot from the right on the scale above.

Now, I'm not here today to try to influence your thinking in either way. Rather, the goal of this report-and for all our my other services for that matter-is to help you maximize your investment goals in alignment with your own personal investment philosophies.

In this report I will give you three generalized gold investment portfolio allocation ideas that offer easy-to-manage and well-diversified approaches to investing in gold with only $5,000.

The first two portfolios will reflect both extremes of the main gold investment principles mentioned above. The last will be a balanced gold investment portfolio.

Within each portfolio I will consider three broad gold investment vehicles including physical gold bullion, gold stocks, and cash and tell you how I believe $5,000 would be best allocated. So let's get started with the gold safety portfolio.

The goal of this portfolio is to provide an investor with a financial hedge against any economic, political, social or currency-based crises with an easy-to-manage and diversified portfolio of gold and gold-related investments. While every type of investment will by nature have some degree of risk, this gold safety portfolio has significantly lower risk than the gold profit or balanced portfolios that we'll talk about in a few minutes. However, it's important to remember that a potential lower reward is usually sacrificed for lower risk. Since this portfolio represents the extreme safety side to investing in gold, it will be very heavy with physical gold and cash, but will still diversify slightly into gold production stocks.

Here's how I would allocate $5,000 for a gold investment portfolio focused on safety:

Physical Gold Bullion: 70% • $3,500
If you're look safety, physical gold bullion is definitely for you. In this gold safety portfolio I am allocating a full 70% of the total investment to physical gold bullion. I recommend that over 50% of this to be in the form of the actual physical gold metal, either bars or coins. However, because you'll only be able to buy a few ounces with a limited budget, I recommend buying the much smaller 0.50, 0.25, 0.10, and 0.05 ounce coins. While it is admittedly much less convenient to hold physical bullion this way, I prefer these smaller coins because they offer more options when it comes time to sell or trade them in. And, if it ever comes down to it, you'll be able to barter more effectively with the smaller gold coins. Physical gold bars and coins can be purchased from many online brokers including Kitco and AmeriGold. These brokers always charge a little over spot prices. Shop around for the best prices.

Gold ETF shares, such as streetTRACKS Gold Shares ETF (Symbol: GLD) and iShares COMEX Gold Trust (Symbol: IAU), also represent physical gold bullion. These ETFs offer much more liquidity than actually holding the physical metal. Because of the higher liquidity, I recommend adding a little ETF exposure to a gold safety portfolio. 10% or 15% should be good.

Gold Stocks: 10% • $500
With so much invested in physical bullion, there's little room for investing in stocks, which have been traditionally more risky than owning the physical metal. Gold exploration stocks are too risky for this investing strategy. However, gold production stocks offer lower-risk and attractive profits in times of rising gold prices. For a maximumly safe portfolio, I believe that 10% of the total investment should be sufficient.

Cash: 20% • $1,000
Since gold prices have traditionally countered movements in the value of the US dollar, a cash investment to take advantage of rising gold prices should be done in countering currencies such as the euro, yen, pound sterling. The Canadian dollar is also a great, liquid hedge against a falling US dollar and is probably the best bet for a physical cash investment for Americans. For this gold safety portfolio, I recommending allocating 10% of the total investment in Canadian dollars.

Allocate the other 10% on currency ETFs. One of the more popular currency ETFs for gold bulls is the PowerShares DB US Dollar Bearish Fund (Symbol: UDN). This fund is based on the US Dollar Index, an index that tracks a weighted performance of the euro (57.6%), Japanese yen (13.6%), British pound (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%) and Swiss franc (3.6%).

Gold Profit Portfolio

The goal of this portfolio is to provide an investor with an easy-to-manage and diversified portfolio of gold and gold-related investments that is both very aggressive and profit-seeking. This is the "high-risk/high-reward" portfolio. Since this portfolio is essentially going after the most money in the shortest possible time, it will be very heavy with gold exploration stocks, which can skyrocket after a company makes an initial gold find.

Here's how I would allocate $5,000 for a gold investment focused on profit:

Physical Gold Bullion: 15% • $750
Gold prices can sometimes significantly swing, although rarely over 4% in either direction in one day. But I would still have some physical gold bullion exposure in a profit portfolio. However, because of it's relatively low liquidity, the actual metal is probably not best to have in a profit portfolio. So for a gold profit portfolio I would stick to the gold ETFs, like streetTRACKS Gold Shares (Symbol:GLD) or iShares COMEX Gold Trust (Symbol:IAU). I suggest 15% of the total investment for a profit portfolio to be in Gold ETFs.

Gold Stocks: 70% • $3,500
Gold stocks are the real meat and potatoes of a high-risk/high-reward profit portfolio, especially gold exploration stocks. Gold exploration stocks, which should constitute 60% of the total investment in a profit portfolio, are stocks of companies that are currently looking for and, hopefully, discovering gold on their properties. As I just mentioned, the stocks can often skyrocket as the company finds gold. However, there is a massive group of gold exploration stocks to choose from, most of which are listed on Canada's TSX Venture Exchange. At last look, there were over 2,500 mineral stocks listed on the TSX-V, making it very difficult for regular investors to wade through. So at the end of this report, I'll give you some information on where you can find help choosing exactly which gold exploration stocks are best to be in.

I also recommend allocating another 10% of your total investment to gold production stocks. These are stocks of companies that have mines and facilities that are producing and selling gold. Gold production companies can also significantly affected by new gold discoveries as well as jumps in spot gold prices.

Cash: 15% • $750
Again, since gold prices have traditionally countered movements of the US dollar, a cash investment to take advantage of rising gold prices would best be done in other currencies. For ease of investing, I recommend having a bit more of a cash investment in the currency ETFs like PowerShares DB US Dollar Bearish Fund (Symbol:UDN).

The goal of this portfolio is to provide an investor with an easy-to-manage, highly diversified and well-rounded portfolio of gold and gold-related investments. Studies and mathematical models have shown that maintaining a well-diversified portfolio will yield the most cost-effective level of risk reduction. You'll notice that the balanced portfolio isn't evenly weighted and is slightly more focused on stocks. This is due to liquidity issues and the nature of risk associated with the different gold investments. In a well-balanced gold investment portfolios gold stocks account for 45% of the total portfolio while physical bullion and cash represent 25% and 30%, respectively

Here's how I would allocate $5,000 for a gold investment focused on balance:

Physical gold bullion: 25% • $1,250.00
In a balanced portfolio, a physical gold bullion investment should be split between the physical metal and gold ETFs. Again, physical gold can be purchased from many online brokers including Monex, USA Gold, Kitco, and AmeriGold. You may want to put a bit more into the gold ETFs, such as streetTRACKS Gold Shares ETF (Symbol:GLD) and iShares COMEX Gold Trust (Symbol:IAU) because they offer much more liquidity than actually holding the physical metal. Another great well-balanced precious metal fund is the Central Fund of Canada (Symbol:CEF), which is backed by both physical gold and silver bullion on a secure basis for the convenience of investors. Unlike the gold ETFs, the shares of the Central Fund of Canada also pays a small dividend.

Gold stocks: 45% • $2,250.00
A nicely balanced gold equities portfolio will also include a good mix of gold companies ranging from tiny, nano-cap exploration firms to large global blue chip conglomerates. I recommend holding a bit more of the gold production stocks because of their higher stability. You may want to consider Van Eck Associates' Market Vectors Gold Miners ETF (Symbol:GDX), which provides targeted exposure to 34 companies worldwide involved in mining for gold or silver ore, representing a diversified blend of small-, mid- and large-capitalization stocks.

Cash: 30% • $1,500.00
In a balanced portfolio, I recommend splitting a cash investment between physical cash and currency ETFs. As I mention a minute ago, I believe that a cash investment in the Canadian dollar is the best bet for Americans. And again, one of the more popular currency ETFs for bearish US dollar investing is the PowerShares DB US Dollar Bearish Fund (Symbol: UDN), which is based on the nicely balanced US Dollar Index. I recommend allocating 30% of a gold balanced portfolio to cash, excluding the US dollar.

If you think you've missed the
boat on Gold...think again!

Gold continues to break multi-year highs, putting an exclamation mark on a metals bull market that has already made fortunes for some far-sighted investors...

Now it's your turn.

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