Why Invest In Gold?
Through human history, gold has often been revered as a precious commodity. However, in 2022 does it still make sense to own gold? Here are some benefits that come from investing in gold, and how to get your hands on some.
Benefits Of Gold Investment
Diversification. Gold offers excellent diversification benefits. Having multiple types of assets in your portfolio e.g. stocks, bonds, real estate helps minimise your overall risk. Think about it this way. If you only invest in stocks and the stock market crashes, you will be impacted greatly as your entire net worth will be down. However, if lets say you have gold which goes up when the stocks take a tumble, you will be better protected in the event of a downturn.
Inflation Hedge. We all know that we can’t leave our savings in a bank account forever due to inflation. Essentially, money that is not keeping up with the pace of inflation is losing its value overtime. Historically, gold’s price tends to rise when the cost of living increases. Therefore, some investors might prefer parking their funds away in gold instead of a savings account.
Other than the above, investors like to own gold for many different reasons. I personally have allocated a small percentage of my portfolio towards precious metals, especially for the diversification benefits.
Let’s say you want to start investing gold, how do you actually go about it?
How to Invest In Gold?
1. Purchasing Physical Gold
There is something about feeling, touching and holding your investment. You can purchase gold bars, coins and other items over the counter in many gold and jewellery stores. If you own gold jewellery, you can use your investments while still holding them in your portfolio. They tend to be less volatile than equities, more of a defensive asset, which may aid in minimising risk in a portfolio. Also, just from a psychological aspect as you can’t check what the exact value of the investment is constantly, you will be more at ease if price fluctuations tend to spook you.
However, there are many restraints with owning gold in this manner. It needs to be stored securely such as in a safe or safety deposit box, needs to be insured and more. You do have to account for these costs out of your total returns and it is not the most “convenient” of investments.
2. Buying into a Gold ETF
This is kind of like buying gold shares, but very easy, more diversified and cost effective. You don’t physically own any gold, but rather buy shares in a “gold fund”. This option is great as it removes a lot of the obstacles of owning gold, while giving the same returns and diversification benefits. The largest gold ETF in Australia has the stock ticker GOLD, which is cool. You don’t get to hold the shiny piece of metal but you do get a much easier investment process.
If you are unsure on how to actually buy shares in a Gold ETF, I have a guide on how to buy shares, click here. If you wanted to invest money in GOLD for example, that is the code you would input when you are making your trade.
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