Should you go for gold?

Date:15 July 2020

When you think of gold, you immediately associate it with wealth. Its value has been the core of many movie and TV plots for decades; but, is it really a worthwhile investment? Let’s take a closer look.

How you can invest in gold

The three most popular methods are investment in 

Gold bullion

This is the most common form of gold ownership. Many people think of gold bullion as shiny, large bars. In fact, it’s characterised as any type of gold that has been certified for its purity and weight. The issue with buying large gold bars is that (depending on the size) they can be illiquid, which makes them very expensive to buy and sell. It should also be noted that investing in a single commodity limits portfolio diversification.

Gold ETFs and Mutual Funds

If you don’t want to purchase gold directly, you can invest in gold-based exchange-traded funds. ETFs are basically a collection of securities that trade on an exchange market. You purchase shares, each representing a secure amount of gold, which are traded throughout the day just like a stock. It is a more cost-effective method than owning gold directly.

There are also a variety of mutual funds that own gold bullion but only a few of them focus exclusively on investment in gold. The advantages of mutual funds involve 

  • Ease of ownership through an investment brokerage
  • Assists with diversification of your portfolio

 

It’s important to note that ETFs are generally subject to passive management, meaning that they follow a passive index-tracking strategy. Owing to this type of investment structure, it’s considered the safest and most convenient way to invest in gold. 

Gold coins

Gold coins are usually purchased from private dealers. The benefits of buying gold bullion coins include 

 

  1. Prices are documented and available in financial publications
  2. Gold coins are usually minted in a weight of one ounce or less, which makes the investment a lot more practical, particularly if you are considering trading.

 

An article published by Forbes comments that ‘For centuries, gold has been regarded as having a negative correlation with equities and a positive correlation with inflation.’ Essentially this means that gold is a safe investment during times of economic uncertainty as well as ‘a worthwhile store of value during expansionary periods.’ Based on the above information, it can be deduced that if you have excess capital to invest, go for gold!

At fio.life, our team of experienced independent financial advisers will provide you with the guidance to you need to grow your wealth successfully through investment.

 

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