Updated: Jul 19, 2021
I have always been a believer that one should own a small amount of gold. Not for the purpose of making money, but as a hedge to protect yourself if there is a financial collapse. I have always kept a small amount of gold bullion in the form of either grams or 1/10 ounces of American Eagle Gold Coins. This way if you ever needed it for food, or to bribe your way out of a dangerous situation, you would have it broken down into smaller amounts so you could use the gold more efficiently. The big advantage of gold is that it is portable. You can hide it under your mattress, keep it in a safe, or put it in your pocket. Silver does not work for this purpose because it would be too bulky to carry around. Silver’s lower value and scarcity has made it less a desirable precious metal to store wealth.
Gold has always been a store of value for thousands of years. It is used mainly for jewelry because of its pliability and beauty. Besides that, it is sometimes used for electronics and computers. The reason I would not put a lot of money into gold is that it produces no income, pays no interest, and it is not a necessary component for us to live. Its value is only based on what others are willing to pay for it.
Bitcoin is similar in the same way. Its value is only based on what others perceive it to be worth. The pros and cons of bitcoin are too large to discuss in this blog, but the main issue I have with gold is the same for bitcoin; its value is just based on what someone else thinks it's worth. The same argument can be made for the US dollar except that it has the word of the most powerful government in the world backing it. The only advantage that gold has over Bitcoin is that it is portable. Although Bitcoin can be accessed anywhere in the world through the Web, if you have no access to the internet, your Bitcoins really can’t help you.
The reason why I would rather own public companies instead of gold or Bitcoin is that I am investing in a growing business that has the potential to create massive wealth. The value is not based on other people's perception, it is based on the reality of its money making ability and the prospects of greater profits in future years. Bitcoin will have a part to play in this world, but it may always be considered an alternate currency, not one that we use everyday.
I also believe that the acceleration of valuations in companies will continue. Companies that are worth ten billion dollars today could be worth hundreds of billions in the not too distant future. There will also be more than four companies with a trillion dollar valuation. You can understand this concept just by comparing how the number of billionaires have increased. In 1982, there were a total of 13 billionaires and now there are almost 2200. In 1982 the richest American was worth $2 billion dollars. That is now the minimum you need to get on the Forbes list of the 400 wealthiest Americans. Some of the companies that I will tell you about in future blogs may be future trillion dollar companies.