Buying Physical Gold as a Money Management Strategy

With all the attention on gold recently I wanted to bring in Justin Tazi from to give us something to think about regarding making gold a valid money management strategy...what are YOUR thoughts? Let Justin and the rest of the world know your thoughts by leaving a comment!


With the proliferation of online trading over the last decade, and the fears of being robbed by “evil” investment managers such as the likes of Bernard Madoff it is no wonder why so many individuals are attracted to the concept of managing their own investments.  It is interesting to note that Madoff will reach the ripe old age of 221 years old when he finishes doing his time for stealing billions of dollars out of hundreds of people.  When it comes to trading the markets however, it is crucial to recognize that as a trader you are faced with the same types of risks as those defrauded by Madoff, risks that can leave you betrayed by your own lack of self discipline.  An effective money management strategy is the difference between your success or failure as a trader.  Then why is it that so many of us spend countless hours studying charts, listening to expert commentary, and are glued to the latest news feeds without the careful respect and study of effective money management strategies.

Perhaps it is because we lack the discipline to see that proper money management will keep us in the game.  It is about conserving and protecting your capital and a focus on winning consistently versus trying to win it big.  It means waiting for the right moment for each trade where a winning position is almost assured.  It means having a clearly defined exit strategy for every position you enter both on the win and lose side. It also means fortifying your portfolio with insurance to protect yourself from financial catastrophe.  It means protecting yourself from what one Madoff victim testified as saying   “Life has been a living hell.  It feels like a nightmare we can’t wake up from.”

One simple form of trader insurance is to consistently purchase physical gold for the life of your trading career.  Regardless of the price of gold, if you dollar cost average it over an extended period of time you will have a real tangible form of insurance that will guarantee your future success.  I once knew a trader that loved to trade anything related to gold, gold stocks, gold etfs, gold options, and gold forex.  There were many occasions where he won it big by making all the right trades, sometimes because of his charting skills and at other times it was simply because he traded at the right time.  He devoured books, news and any analysis that he could find on the subject of gold.  His account continued to grow and he lavished himself with exotic trips and gifts for his wife.  Unfortunately, he lacked discipline and a commitment to proper money management principles in his trading.  No longer did he time things right, no longer did his charting strategies seem to work.  In a desperate attempt to recover from his losses he allowed his emotions to take hold of his portfolio.  It wasn’t long before he had lost everything.  He was no longer in the game and his exotic trips were only a distant memory held in a photo album to remind him of the good old days.  Now had he simply taken percentage of equity from his trading successes and consistently purchased physical gold itself, he would have assured himself victory over the long haul.

Why not add this simple money management strategy of buying physical gold to your overall trading strategy.  Every month go out and buy yourself a few grams, ounces or bars of gold and if you do it consistently, you will never be wiped out by the man made markets that can from time to time be ruthless and without remorse.

Justin Tazi

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