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Financial Advisor Jason Mardinly co-wrote this report.
NEW YORK (
TheStreet) -- Any investor holding this asset or related ones for the past several years has been on what can only be called a roller coaster.
After four years of skyrocketing value, the tables have drastically turned and its value plunged 26% since Jan. 1. That's enough to shake anyone's confidence.
Should you be looking for alternatives? No, because there simply are no alternatives -- if you're using it correctly.
I'm talking about gold.
[Read: <a target="blank" data-add-tracking="true" href="http://www.thestreet.com/story/11991488/1/kodak-the-end-of-an-american-moment.html"><em>Kodak: The End of an American Moment</em></a>]
First, a step back. Gold never was -- and should never be -- looked at as a short-term investment. It serves numerous long-term goals.
For instance, in 2008 investors flocked to it for its safety and the fact that it is an investment uncorrelated to stocks and bonds. Gold is still performing both those roles effectively. Remember, this correlation business is a big deal.
One of the causes of the market meltdown in 2008 was a belief held prior that, regionally, the real estate markets were uncorrelated. That is, if Florida tanked, Nevada and Arizona would continue to do fine. The idea the U.S. real estate market as a whole would decline precipitously was never imagined. That's why bonds backed by a national portfolio of mortgages were deemed "safe." Turns out they were anything but.
In spite of this, or because of it, gold continues to serve as a hedge against inflation as it is a real asset that holds its value more than paper currencies.
Therefore, for the investor seeking an uncorrelated, safe hedge against inflation in his or her portfolio, gold should still be considered the number one investment choice despite having hit a spot price peak in 2012.
Now a step forward. Take a look at this statement: "With central banks around the world printing money, inflation is imminent." Does that match your world view? If so, you (and I) believe it will only be a matter of time before the cash people hold will purchase fewer goods.
If that rings true for you then, as a prudent investor, you will need to offset this decline in the value of cash by holding a small portion of your portfolio in gold-based investments. One of the easiest ways to do this is through an exchange-traded fund.