Investing in Gold: A Cautious Perspective on Inflation

Ted's concern about inflation leads him to consider gold, but investing in productive assets offers better long-term value.

### Investing in Gold vs. Stocks: Understanding Value and Inflation
* 🤔 Ted is considering whether to invest more than **25% of his savings and his emergency fund** in gold due to concerns about **inflation**, which is a common question during times of **economic volatility**.
* 💰 The speaker expresses discomfort in answering this question, noting that many people frequently ask about buying gold when inflation arises, but emphasizes that **gold does not create economic value on its own**.
* 📉 The speaker points out that the value of gold is determined by **what others are willing to pay for it**, rather than any income or product it generates, which makes it a **less attractive investment** compared to stocks.
* 📈 Instead, the speaker advocates for investing in the **S&P 500 Index**, which encompasses **500 large companies** that create products and services, thus generating **dividends and interest**.
* 🛡 Ted is advised that after reaching a **25% savings goal**, he can choose to allocate some of his funds toward precious metals if it brings him **peace of mind**, acknowledging the **emotional aspect of investing**.
* 💎 The speaker draws a parallel between gold and cryptocurrency, noting that both are seen as **stores of value** but share similar limitations regarding their **lack of intrinsic economic production**.
* ⚖ Ultimately, the speaker suggests that there are **more effective ways to hedge against inflation**, such as investing in the stock market, where companies can **adjust prices and increase profits** as inflation stabilizes.
* 💭 While the speaker respects Ted's desire for gold, they believe that focusing on **fundamental investments** will provide **better long-term security and growth**.

[Music] Ted has a question for you next. He says, In light of rate cuts and by extension continued inflation, should I put money in Gold Beyond 25% saving and my six-month emergency fund? I fear inflation will only return again. So, what do you have to say to Ted, man? Honest Ted, I'll be honest with you. I don't love answering this question, and here's why. I just feel bad. I feel honestly more than I feel mean because I have so many people who ask us, and you can almost set your clock by it, that whenever we see volatility or whenever inflation is a concern, it always comes back to like, Hey, should I buy gold? Should I buy gold? Should I buy precious metal? Should I do this? And the problem is, in my opinion, I'm going to say in our opinion, when you go buy gold, you buy a hunk of precious metal, you're buying this thing that's value changes without creating any specific economic

value right like you. The thing that makes gold more valuable is someone comes along after you buy yours and they then say, I want to pay more for that chunk of gold than you paid for it. It's not like the gold did anything. It didn't create any income. It didn't produce any product. It did not provide any service. It's simply what your peers around you assign the value to. For me, that's a harder thing to get super, super excited about. When I think about I can go buy an S&P 500 Index where I'm going to buy 500 different large companies in America that are creating products, adding services, changing the way that we live, creating dividends, creating interest. I just get so, I don't know that I get super, super excited about gold because of the way that the economics of gold work. So, and but I'm gonna give Ted, I'm gonna give Ted a out because this is what he said. He said, After I do my 25% after I'm saving, yeah, is it okay if I allocate some towards precious metals?

and I the thing I say is once you get 25% you get to choose what you do above and beyond. Yeah, when I have people come to me and Ted's thinking about this the right way, get the underlying base assets, that saving, investing 25% of your gross income. But after that, if you sleep a little bit better and have a little more peace of mind because you bought some gold, um, I'm not going to pick on you about that. That's the same thing I tell all my crypto people out there is that if you know, if you want to jump on that because it does feel like, and I'm going to probably get hate for this, but gold is, um, it's considered this holder of value when you get into the world's coming to an end or craziness out there or you get into hyperinflation. Um, historically, that's been the case, but I will say it's kind of interesting now that crypto is on the scene. It seems like it's gold for

young people because that's the same promises, but it's got the exact same limitations that Bo was talking about with gold, is that it doesn't innovate or create anything upon itself. It's counting on the only way you make money is if somebody pays you more for it, and it has friction cost because typically with gold, you have to pay somebody to keep it safe. Same thing with when I think about crypto, is that you have to go through something that facilitates the transaction that has a little bit of drag or friction cost, and then you once again have to pay somebody, or I guess you don't have to pay somebody, but if you want to make it accessible to make the transactions easy. I just did my taxes. You know, I did this whole experiment with crypto for about a year and a half. It was way too volatile to me. I lost a chunk of money on it, and so I just, it's one of those things if you're Ted, if you if

you get sleep better at night. I'm not going to, you know, pick on you for it, but I don't think that it does what everybody says it's going to do in the brochure necessarily because it's. I always think about if you get to the end of times or you get into these inflationary periods, how is it actually going to work? And typically, when I visualize that, it seems like it's not as great because you can't break off pieces. Um, I guess inflation, it's be some, but even if I want to protect against inflation, don't you feel like there are much better ways to protect against inflation than everybody always the stock market? I mean, because companies will raise their prices, and you will be the recipient of that higher revenue, the higher profit down the road once the inflation gets back under control.

Is Gold a Good Buy When Rates Fall?

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The Money Guy Show

Ted is considering investing in gold due to concerns about inflation and volatility.

The speaker expresses hesitation in recommending gold, as its value is driven by peer assignment rather than economic production.

Instead, they suggest investing in the S&P 500 Index for a more impactful and dynamic approach to building wealth.

The Role of Saving and Investing in Financial Peace

Saving and investing 25% of gross income is crucial for financial stability.

After reaching this goal, individuals can choose to invest in assets like gold or crypto for added peace of mind.

Gold has historically been seen as a safe-haven asset during times of crisis, but crypto is now emerging as a modern alternative.

Both gold and crypto share similar limitations, as they rely on someone else paying more for them to make money.

They also have friction costs, with gold requiring payment for safekeeping and crypto needing facilitators for transactions.

The speaker's personal experience with crypto was negative, leading to a loss of money due to its volatility.

Questioning the Effectiveness of Sleep and Stock Market for Inflation

Getting better sleep at night may not have the transformative effect that people expect.

The speaker doubts the stock market's effectiveness in protecting against inflation, suggesting there are better ways to do so.

They argue that companies raising their prices during inflation can ultimately lead to higher revenue and profit for investors once inflation is under control.