THE FIVE LAWS OF GOLD

I came upon the following article, published in Investing Strategy on 30 July 2009 and was amazed by how relevant each point is for us today, even in our high-tech driven society.  Have a read and see what you think?  I think you'll find it interesting!

"What can these ancient laws teach us about investing today?

"A bag heavy with gold or a clay tablet carved with words of wisdom; if thou hadst thy choice, which wouldst thou choose?"

According to George S. Clason, author of 1926's seminal money book The Richest Man in Babylon, 29 out of 29 Babylonians would choose gold.

We can't offer you a lump of clay -- only a flickering screen of text -- so Clason's fanciful Babylonian words of wisdom might now be even less well-received. Clason was making up stories about Babylonians

for US suburbanites in the years before the Great Depression, so are his five laws of gold even relevant in our online, instant access world?

Absolutely they are!

Just as Arkad, son of Nomasir, learns in The Richest Man that gold is nothing without wisdom (Arkad fritters away his inheritance before earning it back managing slaves -- nobody said these were the '5 politically correct laws of gold'), so Clason's guidelines hold true today, whether you consider them 100 or 5,000 years old.

Let's reconsider them in the hard light of 2009.

Pay thyself first

1. Gold cometh gladly and in increasing quantities to any many who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.

Nobody ever got rich living from one wage slip to the next. Saving a portion of your income is the first step to prosperity in later life.

Clason's one-tenth target is a good ballpark figure, but you will need to put aside much more if you've left it until your 40s or even 50s to begin saving for retirement. Most people ignore pensions until it's too late, and we're all living longer. As a result, many people face a big drop in their living standards on retirement.

Start saving your gold today! If you can invest a further 10% of your income after pension payments, you've got a great chance to grow a very healthy nest egg.

Speculate to accumulate

2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

Money hidden under the mattress doesn't grow, it just stops you getting a good night sleep. To see your savings multiply, you need to put it into investments with healthy prospects for growth -- and usually paying a regular income.

Cash savings are fine to start with, though rates are currently low. But for long-term savings, dripping excess money into the stock market via an index fund and reinvesting the dividends offers the best chance of impressive returns.

Ironically, gold itself doesn't pay an income and is essentially a bet on the future price of gold. But Clason uses gold to mean money, of course.

Read, research and seek advice (carefully!)

3. Gold clingeth to the protection of the cautious owner who invests it under the advise of men wise in its handling.

This is the rule at odds with Motley Fool thinking. It should be as Clason describes, but too often the 'wise men' of the financial services industry have been far cleverer at making money out of you rather than for you.

There was good news recently, however, with the FSA announcing it is to ban financial advisors being paid by commission. Instead they will charge flat fees.

Advisors and fund managers can still be incompetent and expensive, however, as many pension holders can attest. Nobody cares about your finances as much as you do, so read up all you can to talk to 'the Wise' about your money on an equal footing.

Don't be a mug punter

4. Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.

We hardly need reminding of the truth of this law right now.

From banks and hedge funds buying murky mortgage-backed securities to novice buy-to-letters snapping up over-priced shoeboxes in Spain against a backdrop of TV property porn, we've just lived through one of the most witless transfers of capital in human history.

Incredibly the credit and property bubble came only a few years after the dotcom boom, when people who wouldn't know a start-up business plan from a printer manual raised and invested billions on the back of absurdly naive financial projections.

And now with the poor performance of shares and property recently, we're seeing more and more interest in exotic and alternative investments.

Re-read the fourth law! If you're going to buy stamps, ostriches, paintings or a case of fine wine, you should really know as much as the seller to avoid your alternative investment being just a new way to lose money.

Don't be greedy

5. Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.

High street lenders promising investment bank earnings to shareholders. Wealthy investors content to take Bernie Madoff's double-digit returns per year with no questions asked. Private investors spreadbetting the oil price as it approached $150.

None of it suggests we're any more sensible in the 21st Century than Clason's young Babylonian Arkad, who loses most of his inheritance betting on a surefire racehorse from Ninevah.

Outsized returns for little skill or effort only ever come in three ways -- luck, taking on bigger risks, or indulging in skullduggery. Some things will never change."

WHAT DO YOU THINK?  I'D LOVE TO HEAR YOUR THOUGHTS . . .

Comments

[Trading Forex]

Who would ever think these would still be right today- but they are. To be honest I would be tempted by a good piece of information :) but still - a whole lot of gold is always better!

[gold buyer]

There has always been an issue with selling gold online, more so now than ever. Some online gold buyers have recently been highlighted on TV and tadio for their tactics to buy gold at one third of the gold market value.

[Forex Trading]

Hello,
I really liked the way in which you have provided us information about the five laws of gold. I think we should invest a portion of our income so we can make our future much better.....!!

[boxing machine]

definitely an article full of gold and integrity, thanks for the Ocean of knowledge.