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The reasons why a renowned guru bets on a traditional asset and discards innovative companies

The reasons why a renowned guru bets on a traditional asset and discards innovative companies
The reasons why a renowned guru bets on a traditional asset and discards innovative companies

The ‘Big Short’ investor Michael Burry just made a big bet for gold and sold the shares of the technology giants Alphabet and Amazon.

And since Burry’s moves often make headlines after the hedge fund manager bet big against the U.S. housing market in 2008 and won big, his investments have been closely watched ever since.

According to a filing with the Securities and Exchange Commission (SEC), Burry’s company, Scion Asset Management, has made several adjustments to its portfolio in the first quarter of 2024.

Among Burry’s notable moves were the sale of his holdings in Amazon (AMZN) and Alphabet (GOOGL) and the increase in its stakes in the Chinese companies JD.com (JD) and Alibaba (BABA).

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‘Big Short’ investor Michael Burry just made a big bet on gold.

Forbes Argentina

Burry also made a sizable bet on gold by purchasing 440,729 shares of Sprott Physical Gold Trust (PHYS), valued at $7.6 million at the end of the first quarter, making it the fifth-largest position in his portfolio. The closed-end fund’s official website says it holds “substantially all of its assets in physical gold bullion.”

A unique feature of the Sprott Physical Gold Trust is that investors have the right to redeem their units for physical metals on a monthly basis, as long as they meet the minimum redemption amount. This requirement is quite considerable, as “a unit holder must have enough units to equal one good quality London delivery bar full size (approximately 400 oz)”.

The brilliant rise of gold

Gold is already seeing a notable rise. Earlier this year, the precious metal was trading at $2,062 per ounce. Today, it is $2,357 per ounce, reflecting an increase of 14.3%.

To put this into perspective, gold has outperformed the S&P 500, which has gained 11.7% over the same period.

There are many reasons why investors might want to add gold to their portfolios. One notable reason is inflation. Inflation often arises from the ability of central banks to freely print fiat money. Gold, however, cannot be created from nothing. Its relative scarcity and durability make it a reliable hedge against inflation, preserving purchasing power when paper currency loses value.

Additionally, gold can act as a safe haven during times of economic uncertainty and geopolitical tension. During periods of market volatility or global instability, investors often turn to gold for its stability and reliability. This precious metal has historically maintained its value, becoming a reliable asset in uncertain times.

For those looking to follow Burry’s lead and add a touch of gold to their portfolios, here are three easy ways to do it.

Buy gold bars

The easiest way to invest in gold is to buy physical gold in the form of bars or coins.

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Investors can also buy shares of gold mining companies.

Investors can also buy shares in gold mining companies.

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Gold bullion can be purchased from reputable dealers and stored safely at home or in a safe deposit box.

The advantage of owning physical gold is its stability and tangibility, providing a sense of security and ownership that is not dependent on financial institutions. However, it requires safe and secure storage, which can increase the total investment cost.

Invest in gold stocks/ETFs

Investors can also buy shares of gold mining companies. When the price of gold rises, miners tend to enjoy higher profits, potentially increasing the value of their shares.

Adding gold mining companies to your portfolio can provide diversification. However, keep in mind that this also exposes investors to market risks and the performance of the underlying companies.

In addition, there are exchange-traded funds (ETFs) that track the performance of gold. These ETFs aim to mirror the price movements of gold by holding physical gold or gold futures contracts.

Because gold ETFs trade on major stock exchanges, investors have the ability to buy or sell shares at market prices throughout the trading day. They provide a convenient way to gain exposure to gold without the need for physical storage or dealing with the logistics of buying and selling bullion.

Source: Ambito

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