Investors can be forgiven for scratching their heads about the price of gold. Just when they think it can’t go any higher, there it goes, setting a new record.

For the past 10 years, gold has been surpassing expectations. It had dropped to $272 an ounce in 2000, and, at the time, few thought the price would rise dramatically. But over the past decade the price kept rising – breaking records – until it hit a high of $1,226 in December 2009. With each new record, many observers predicted that the price could not possibly go much higher and that the bubble would burst. As of this writing, the price has dropped to $1,092, with many analysts saying that the bubble has finally burst. But that has been said many times in the past decade, only to be followed by another rally.

Back in 2000, those who predicted higher gold prices were envisioning a worsening economy, which usually drives up the value of gold. It is the standard investment that many turn to for security in uncertain times.

Quite often the price performance is the inverse of the stock market’s, which does better in a stable environment. Some say now that the economy appears to be steadying, gold prices should stabilize or drop. In fact, many financial advisors caution against jumping into the precious metals market, fearing a plummet. Even some of those who previously encouraged precious metals investing are backing off these days.

“It was great to get in about three or four years ago, but now you have to be much more cautious,” Cary Carbonaro, a financial planner with Stonegate Wealth Management of Clermont, Fla., told the Orlando Sentinel. “It has had a huge run-up, but it is a cyclical thing.”

Even George Soros said, during the World Economic Forum in Davos earlier this year, “The ultimate asset bubble is gold,” but then, according to reports, doubled his own investment in gold a month later. That could be because he foresees an increase in inflation, which also drives up the value of gold.

Those who want to jump on the golden bandwagon are advised to be cautious in taking that leap. Even the most enthusiastic advisors still say investors should put only a small percentage into precious metals – 5 to 10 percent of their total investment money at most. Also, most advise their clients to invest in a fund rather than buy the metal itself, mostly for security reasons. After all, what’s the use of an insecure investment meant to bring security in an insecure time?

Richmond, Virginia (Thomas P. Marshall) – As some people return to the investing market, many are seeking ways to spread their risk.

With individual stocks, investors are obviously tied to the fate of a few companies. Also, some individual investors have found they don’t want to be playing the market, trying to time increases and decreases and earning more gray hair than money during prolonged downturns.

Some might turn to mutual funds, which would pool huge sums of money and invest it across many industries and types of investments. One fund can include stocks and bonds. Another type is a subcategory fund that might only have stocks and maybe even only focus on a particular industry. Individuals have a vast universe of funds to choose from to match their risk tolerance and investment preferences.

Some people might like the idea of the mutual fund but not the lack of control. They don’t want to just set it and forget it.

For them, exchange-traded funds offer an acceptable hybrid. ETFs can be thought of as a mutual fund that trades like a stock. Like an index mutual fund, an ETF represents a basket of stocks that reflect an index such as the S&P 500. But it can be traded on a stock exchange, just like a company. ETFs combine the benefits of a mutual fund’s investment diversification and low operating costs with the trading flexibility of individual stocks. Investors can short-sell ETFs, buy them on margin and purchase only one share, just like a stock.

ETFs have grown in popularity very quickly since they were introduced in the early 1990s. The first successful one was an SPDR fund, managed by State Street Global Advisors. The acronym came from the first fund, the Standard & Poor’s Depositary Receipts (SPY), which is also reportedly the biggest ETF in the United States. State Street now manages many SPDRs.

Now hundreds of ETFs are trading on the market, tracking a wide variety of sector-specific, country-specific and broad-market indexes. Some investors also like ETFs for their transparency; they are required to reveal their holdings on a daily basis, unlike mutual funds, which only do so periodically.

Whatever the reasons, it is clear that people like them, because ETFs have grown tremendously during the recession. ETFs now have more than $1 trillion invested in them, according to a BlackRock report in January. The assets under ETFs’ management worldwide grew by 45.2 percent in 2009 alone. That momentum does not appear to be slowing down this year.

A bond ladder is a strategy for managing a collection of individual bonds or CDs. Under this strategy, the maturities and the timing of interest payments of the fixed-income investments are simultaneously staggered – or laddered – at specific intervals. Each of these bonds represents a different rung on the ladder. The rungs are determined by the amount of investments divided by the number of bonds. Most experts recommend bond ladders with at least five rungs. This requires total investments between $10,000 and $50,000.

For example, an investor who puts $50,000 in five different bonds with a face value of $10,000 each has set up a bond ladder with five rungs. Each rung has a different maturity date. The first rung of bonds matures in one year, the second rung matures in two years, the third rung in three years, the fourth in four years and the fifth in five years. In effect, each rung of bonds reaches maturity at an interval of one year.

The distance between the rungs – that is, the interval of bond maturities – can be set anywhere from every few months to a few years. Bonds, however, are long-term investment vehicles that earn higher yields with time. Making the distance between the rungs longer typically results in better yields. The trade-off is that this exposes the investor to reinvestment risks and lack of access to the funds. Making the distance between the rungs shorter reduces the average return.

Financial experts use bond ladders to generate consistent returns and low risk, and to adjust cash flows according to the investor’s financial objectives. For example, the bond ladder can be set up to function as a source of income during retirement..

By staggering the maturity dates the investor also avoids being locked into one particular bond for a long duration, unprotected from bull and bear bond markets. If the investor poured the full $50,000 into one single bond with a yield of 5 percent for a term of 10 years, he or she wouldn’t be able to capitalize on increasing or decreasing interest rates. The bond ladder approach smoothes out market fluctuations because bonds mature at regular intervals.

A bond ladder also protects the bond portfolio from call risk. Call risk is when a bond issuer takes advantage of the callable bond feature and redeems the issue prior to maturity because of the high rate being paid on the bond. In a bond ladder, there is little chance that all bonds in one portfolio will be called at once because the maturities are staggered.

The bond ladder approach can be used for various fixed-income investment vehicles, including debentures, government bonds, municipal bonds, Treasury bills and certificates of deposit. The “ideal” bond for this strategy depends on the investment objectives and the investor’s preference.