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7 Practical and Emotional Tips for Resisting the Temptation to Invest in Gold

As a licensed psychologist and a Registered Financial Consultant I often see how investors allow emotions to sabotage their efforts at investing long-term to build a secure nest egg. During periods when the stock market is weak or fears of inflation are high, gold often spikes in value, tempting people to invest in bullion-related securities whose value fluctuates with changing gold prices. Some investors are tempted to buy Krugerrands or other coins that change in price based upon their bullion value. This article identifies the emotional issues that make gold a tempting investment at times, explains why gold is a terrible investment, and provides 7 tips for resisting the urge to invest in gold.

Over the decades gold has periodically spiked in price and then crashed. During the inflationary period that occurred in the late 1970s and in 1980, gold reached $850 an ounce before plummeting in value. Recently, we have seen a new spike in gold prices with gold reaching over $1000 an ounce. The latest surge has been fueled by record highs in gasoline prices, fears of inflation, and a weak stock market.

When gold prices surge, numerous investing companies spring up, touting gold as a wonderful investment. The companies describe the dramatic returns that gold has produced over the last two or three years, which dupes investors into believing that gold offers the prospect of a wonderful return. Unfortunately, gold is one of the very worst investments that an individual can make. When we examine long-term returns, we find that gold has failed to outpace inflation over the last 25 years. Gold has dramatically underperformed the S&P 500, corporate bonds, and even completely safe U.S Treasury securities. Simply put, gold is a horrendous investment for the long-term.

In addition, gold is one of the most risky investments an investor can make. The hype accompanying spikes in gold prices is often greatest just before the gold market crashes, luring investors into the market at the very top.

How can we avoid the temptation to invest in gold? Below I outline 7 tips.

Dr. Rob’s Practical and Emotional Tips for Resisting the Temptation to Invest in Gold

1. Ignore news reports that describe soaring gold prices. Historically, spikes in gold prices have been relatively short-lived.

2. Recognize your emotional vulnerability to being tempted to invest in gold. Descriptions of dramatic price increases often trigger feelings of greed and envy.

3. Keep in mind that investments that go up quickly have a tendency to go down quickly. Focus on generating steady returns over time.

4. Discount the claims made by companies that specialize in selling bullion-related investing products. These companies are more interested in sales commissions than in making money for you.

5. Always focus on historical averages for long-term returns, which will lead you to the stock market for building a strong nest egg over time.

6. Obtain advice from a licensed, qualified financial professional before making any investing decision. Financial pros can educate you on realistic expectations for long-term returns and guide you to products and services that will meet your specific needs.

7. Consider contacting a Financial Behavior Coach™, a Financial Behavior Consultant™, or some other professional who is specially trained to help you manage the emotional factors that impact money decisions. Don’t allow hope or greed to lure you into investing in gold.

About the Author

To begin the process of mastering money emotions and taking control of your financial destiny, complete the free quiz, the Money Attitude Profile (MAP)™, at http//www.DrRobCanHelp.com. Please contact me with comments at DrRob@DrRobCanHelp.com.

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