$265,000.
That’s your share – and the share of every U.S. taxpayer – of our $34.6 trillion national debt.
And that figure is growing at an alarming rate.
Analysts at Bank of America recently estimated we’re racking up $1 trillion of debt every 100 days… So the debt owed by each taxpayer is going up $60 each day.
In February, the Congressional Budget Office released its latest budget and economic outlook report. It shows that the public debt is now at 99% of gross domestic product (GDP). And that number is expected to grow to 116% over the next decade.
That’s the highest level of debt since the end of World War II. Back then, the debt to GDP ratio was 106%.
Many people are concerned about the government’s ability to pay its bills. Especially since it’s been narrowly avoiding shutdowns every few months as lawmakers battle over the budget.
Last year, Fitch Ratings downgraded America’s credit rating. Two out of the three credit rating agencies now say our government debt doesn’t deserve the safest “AAA” rating.
That’s why people are hedging their bets with investments in gold. Over the past six months, the price of gold has increased by more than 12%. And with an increasingly uncertain economy, demand for the metal could keep rising.
Here at Intelligent Income Daily, we think it’s a good idea to diversify your investments to protect your portfolio from uncertainty. And assets like gold are a time-tested way to do that.
But don’t rush out and buy gold from a store – you could be missing out on a lot of potential profit.
Here’s why…
Avoid the Worst Way to Invest in Gold
Most people think investing in gold means buying coins or bars.
But that’s one of the worst ways to add gold to your portfolio.
When you buy gold coins or bars from a dealer, you instantly lose 3–10% of the value. That’s because the company you’re buying from has to make a profit. So it marks up the price before selling it to you.
And when you try to sell gold, you take another hit.
Plus, you’ll have to hold onto the gold in between, which means buying a safe and security system or paying a company to store it for you.
All those markups and expenses mean it’s hard to make a profit from gold coins and bars, even if the price of gold does go up.
One way to cut out most of the middlemen is by using an exchange-traded fund (ETF) that tracks the price of gold, like the SPDR Gold Shares ETF (GLD).
Though this ETF has a 0.4% expense ratio, that’s much better than trying to buy and sell gold coins and bars.
However, for income-focused investors like us, there’s still some downside… Gold, whether in physical form or in an ETF, simply doesn’t pay any dividends.
But there’s one way to get reliable income from an investment in gold…
How to Earn Income From Gold
I’m talking about gold royalties. And one company on my radar that focuses on gold royalties is Royal Gold (RGLD).
In exchange for financing gold mines, Royal Gold gets a cut of all the gold produced. So while gold mining companies do all the hard work, Royal Gold just has to wait to cash in the royalty checks.
It can then use that money to invest in more royalties and to reward shareholders with dividends.
Over the past two decades, an investment in Royal Gold has produced nearly twice the returns compared to investing in a gold ETF. In fact, Royal Gold has even done better than the S&P 500.
Royal Gold has a portfolio of royalties covering more than 180 properties around the world. And while most of its income comes from gold, it also collects royalties from silver and copper mines. That means an investment in the company adds diversification with several different metals.
And here’s the best part… Royal Gold has increased its dividend every year since 2002. That means it has grown its dividend 23 years in a row. That long dividend growth history illustrates the company’s financial strength and stability.
Royal Gold yields 1.5% and trades at 15x cash flow. That’s a 30% discount from its historical average of 22x cash flow.
So before you go out and load up on physical gold, consider diversifying and protecting your portfolio… by adding shares of this gold royalty company trading at a discount today.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily