Compelling Reasons Why Investing In Gold Is A Smart Idea

October 23, 2020

Different people have different attitudes to money. Some folk spends everything they earn on payday.

Others think more long term. Even financial investors have different attitudes to risk: some people want a low risk resulting in a low gain, whilst others are prepared to take a chance on a high-risk investment. It’s a great idea that we can get our money to work for us. It is for this reason that people choose to invest in stocks, shares, cryptocurrencies, hedge and mutual funds, or even real estate.

Gold is the oldest currency on Earth. It has even been discovered buried in a gravesite dating back to 4500 BCE. It is also one of the most sold financial instruments on the planet. Let’s see why so many people today are investing in it.

Beginners Can Get Involved

Whether someone wants a short or long term investment, it can be a viable choice. It can be an expensive option, however, so people need to know exactly what they are doing. Fortunately, people don’t need to struggle alone; there are a number of websites that provide helpful information on the subject. When it comes to gold trading people are seeking to learn about the benefits and strategies, as well as the risks. They also want to be educated about the different fees and platforms.

It Can Be Bought And Resold

We’ve all heard about ‘rainy day funds’: sums of money put aside for unexpected or special future circumstances. Some people invest in bullion as their long term backup fund. The asset can be easily liquidated when needed because people are always looking to buy it. This means anyone needing the cash quickly is unlikely to be disappointed.

The issue can be the timing, and the return rate available. The moment a person needs to sell may not be the best time market-wise. There is a saying that bullion is frequently sold at a premium and bought at a discount.

It Protects From Inflation

Bullion rates do not fluctuate when inflation rates increase. When it is soaring, currency rates in the world markets may decrease. Currency-backed assets may go up in price but reduce in value. Investors in bullion will be quietly confident of their choice of investment.

When the economy sinks it takes a lot of things with it, including the stock markets. Inventors will be encouraged by the knowledge that bullion can recover itself quite quickly on the markets. This is because nervous investors will be looking to put their money in a safer place.

When recessions appear on the horizon or there is some kind of financial crisis, it becomes a viable investment method. This is also true when there are Brexit uncertainties, acts of terrorism, or the US/China trade war. 

The Assets Can Be Physical

If someone owns bonds or stocks they will possess paperwork and have access to certain online screens. People can buy physical bullion and store it at home if they wish, but this could be a tremendous security risk. A secure environment will therefore be needed for storage. A broker or bank may be willing to provide this service for a fee.

It’s possible to buy jewelry, coins, and bars from jewelers. Of the three, bars and coins are expected to increase in value the most. Bars are called bullion, and they will contain a stamp. This will confirm the purity level of the bar.

Coins or bullion can be obtained from brokerage firms, a number of banks, and even the US Mint. The latter has been serving investors since 1986.

The Assets Can Be Virtual

It’s possible to invest in futures contracts and mining companies. These securities are like other stocks and shares in that they are affected by stock market prices. The value of someone’s investment in a mining company will not so much be based on the bullion value, as the company’s financial well-being at the time.

Gold ETFs (exchange-traded funds) are funds specifically investing in physical items. People can become involved in these funds to avoid storage issues. Nothing in this life is without risk, however. If a hacker gained access to such an account the funds could be removed.

In order to invest in an ETF, someone will need a DEMAT account. They will also need a trading account. A broker will also need to be involved, and they will levy a fee between 0.25% and 0.5%. It will be 99.5% pure. 90% of the money paid by the investor will be related to the physical items. The remaining 10% will be invested in debt instruments.

If someone tells you they’ve bought an ETF it doesn’t mean they actually own the bullion. What they have effectively obtained is a share in a trust’s ownership of it.

Its Limits Are Clearly Defined

When someone walks into this field of investment they can quickly learn the pros and cons; there shouldn’t be any nasty surprises along the way. Anyone who wants to invest in a pension will be seeking current access to money as well as good growth in their pension fund. Bullion would not be a suitable option here, plus there could be financial penalties for taking out the money early. 

The wise choice is to only deal with a reputable broker from the start. They will make sure that this is the type of investment you really need. They may suggest there is an even spread of investments, with a small amount in bullion. This will be to provide an insurance policy against the stock market tumbles. It may take months before you feel confident enough to step out and invest.

Bullion has been a consistent performer over time (e.g. between 2001 and 2008). It has performed better than housing, stocks, cash, and bonds over a decade. Supply and demand will vary, and this will affect its financial value at that moment. Having said that, its supply is limited and there is an increase in demand. It is more valuable than silver, however, and any investor may well be wise to increase their share at this time. When the profits are tax-free it can be an enticing option for anyone.

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