The Positives And Negatives Of Gold Investment
For many investors, gold bullion and coins served as the best sense of security. However, this gold investment has potential upsides and downsides.
Before you dig into buying gold, weigh all the possibilities – including the positives and negatives of gold investment. As always, know the potential risks and rewards before gold purchases.
Here’s a quick guide to help you decide in your new venture.
Benefits of Gold Investment
There are 5 positives of gold investment you must know. These are:
Inflation Hedge
According to the finance website cashmart.com.sg, people buy gold to protect themselves from inflation. If the Australian dollar significantly gets devalued, gold value retains. In some cases, it even increases.
Your money saved in banks might lose its value while the gold stays the same. Be secured financially with the positives of gold investment.
Security of Value
Gold investment is a good financial backup. Truth be told. It is an asset that will always be in demand, regardless of how bad the time gets.
The perks of this investment – you always have a valuable asset. Financial depression or major war economy won’t bring your gold investment down.
Portfolio Diversification
A good investor’s characteristic is to spread their money around. It’s better to divide your eggs in different baskets rather than put them all in one basket. What do they do? Investors buy stocks, bonds, property, and gold. It is actually an excellent strategy. If one market crash, you have three investments plummet in value.
Luckily, for whatever situation the economy is in, a gold investment retains or its value increases.
Simplicity
Buying stocks and property is tedious work. Be updated with the current trend to make your money worthwhile. Meanwhile, buying gold coins is easier – perfect for newbies in money investment. In fact, there is no shortage of gold dealers. Buy them in all sorts of forms like jewelry, coins, and bullion bars.
In addition, storing gold is so simple. Store it safely, securely, and conveniently at your deposit box at your trusted bank. The more gold you purchase, the more safe-deposit boxes you need.
Tangibility
Aspiring investors are hesitant to take on shares and cryptocurrencies. Why? They are uncomfortable buying assets they can’t touch. There’s always fear that an electronic file will not retain value over the long term. This is why gold is preferred by many. It is tangible. Value retainment is more believable since they can see, touch, and feel.
With the magnificent positives of gold investment, it has become trendy to numerous investors. Don’t hesitate to be one of them.
Problems Encountered with Gold Investment
Although gold investment sounds too good to be true, there are some reasons why some investors might not want to.
Not A Passive Income Asset
Investment is a passive means of earning. Money put in a term deposit earns interests. Shares investment receives dividends. Investment property collects funds if used for rent. On the other hand, owning a gold won’t get any yield. This is one of the negatives of gold investment.
Low Financial Gains
The value of gold retains and increases over time. However, property and shares tend to gain more value. Between 1980 and 2017, the price of gold increased by 132.9%. Meanwhile, the All Ordinaries jumped by 1,133.5%.
Quite interesting right? If you aim to earn more, the negatives of gold investments impact your earning.
Transaction Inconvenience
Oftentimes, buying and selling gold with dealers holds a significant margin. As a buyer, authenticity also is an issue. You have to make sure that you’re acquiring real gold. Test it to see if you pay for the right value.
On the other hand, a seller needs to prove you’re the genuine owner of the gold. When you sell physical gold, thorough research about gold trends and values must be done. You don’t want to lose an asset without gaining from it right?
Storage Difficulty
The most common dilemma of gold owners is storage. Ask yourself, where do you want to put it? Is it really safe in the bank? How about hiding it inside your house vault? Actually, there are secure places to choose from. The question is, are you confident enough to trust them for safekeeping?
Volatility
Through time, it is evident the gold prices make big changes in a short period. A better example is price fluctuation between 2010 and 2013. In 2010, the price climbed up to 30.6% while it fell down to 27.6% in 2013.
Luck and good timing are needed when you’re planning to buy gold. If the price goes down, grab the opportunity. You’ll never know when the price might hike up or fall tomorrow.
For every decision you make, there are pros and cons to consider. The same goes when buying gold. Weigh your options wisely and think about the long-term plans.
Now that you know the positives and negatives of gold investment, take the risks. Research about the latest gold trend. Talk to your investment advisor about your gold interest. You’ll need all the guidance and knowledge for this venture.
Note: This article originally appeared at MoneyMiniBlog.
Category: Commodities
