The traditional thinking in times of recession (and providing that you have the extra cash) is to invest in gold. However, there is something to be said being a contrarian investor – one who goes against the grain and buys what everyone else is selling and selling what everyone is buying. After all, the golden rule of making money in the stock market is to buy low and sell high. You will only achieve this goal if the pendulum is tipped in your favor in a stock transaction.
In the past couple of years during the recession, we have seen the price of gold skyrocket as investors hedge against a weakened currency. Therefore, the question is with gold price rising, should buy it in hopes that it will go higher? Not according to Warren Buffett, billionaire investor and CEO of Berkshire Hathaway.
According to Warren Buffett’s view on gold, there’s no intrinsic value in the material. It has no use. People dig it out of the ground and then melt it only to put it back into the ground and hire more people to guard it. If Martians were to visit us today, they would think that Earthlings were pretty weird.
When you put it like that, it does seem silly that people would invest in gold of its lack of usefulness. It just needed someone like Buffett’s investment savvy to point it out. So how does one hedge against a weak dollar and inflation? The thing about Buffett is that he does not look at the short term but thinks way ahead for his long term stock picks. His stock picks are ones in which are fairly priced, have intrinsic value, have margin of safety and have a business moat that keeps away the competition. Does that sound like it’s too much to ask? Not in this recession where some companies are attractively priced and everyone is chasing gold and other commodities. So be the contrarian investor and buy what everyone else is selling.
Besides the disciplined approach, I believe the most difficult part of forex trading was understanding the processes and terminology of this dynamic money spinning environment.
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