In the early '80s, gold bounced around $800 an ounce. In 2002, gold was at $300 an ounce. Ouch!

With the exception of a limited amount of industry uses, gold is traded as a commodity. Hoarded by some as a long-term investment, they buy and hold. Buy and hold is not an investment tactic. Holding onto any security that goes below 8 percent of what you paid for it is not preservation of wealth — the first rule of investing.

How can gold hedge against inflation? When the value of the dollar goes down, historically the value of gold goes up. There's the hedge, but you have to manage it, stay on top of it and trade it when the time is right. Let's look at the options.

Buying gold in bulk presents problems. What do you do with the bullion ingots or coins when they arrive in the mail? A safe deposit box, perhaps. The commissions on gold trades are high, with you paying fees for both the purchase and sale.

You are presented with another problem when you wish to sell. You have to pack it up and ship it back to the gold brokers. The gold may not be assessed at a value you expect based on the market price, especially if you use a trader different than the one that made the purchase for you. On top of that, you have to find a buyer. Doing so may be difficult if the market is in a downturn. It takes time for all this, and you may miss an opportunity to stop-loss the downside or reap the rewards of gains. Market timing is crucial no matter what the investment.

There is another way to invest in gold. Go online and research gold and precious metal mutual funds. Write down the five-letter symbols of the funds that interest you. Next, get on the phone with a discount brokerage firm and ask about precious metal funds. You can inquire about the funds you researched and ask the broker for suggestions as well.

You may wish to give the discount broker some guidelines. Tell the broker you do not wish to pay a commission, you do not wish to pay a transaction fee, and you want in at net asset value — the lowest price of a mutual fund. Within the fund will be gold, maybe silver, mining corporations and trading firms. You are diversified within the fund, which is very wise. You can buy with the broker for about $45 a trade or go online for about $10. When it comes time to sell, you can make the trade at the same cost.

There you are, invested in gold and preserving your wealth. Good job.

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