Diversify Your Portfolio With Physical Gold
Gold is the perfect investment. Its easy to buy, sell and trade in large amounts because of its liquidity that can be transferred easily between buyers or sellers anywhere at any time making gold one of the most secure investments out there!Gold doesnt just offer you security with your purchase either carrying around some raw metal might not sound as appealing but it actually has another benefit too these days stocks are also pretty liquid , however even though theyre considered high-liquid things like mutual funds require trading so if something goes wrong then all those people lose their money whereas investing $5k into Gold will give them access FOREVER which means less stress both emotionally
Disclaimer: The Stocks,Gold,ETFs and companies mentioned in this posts are used for information and educational purpose These stocks and companies are not recommendations to buy and sell
Please be aware that this blog post contains affiliate links and any purchases made through such links will result in a small commission for me .
Advantages To Buy Gold Coins
Gold and other hard metals have always been a time-honored part of traditional investment plans. Heres why:
- Gold tends to go up when other investments decline, providing a stabilizing effect for your portfolio.
- Gold is a bulwark against inflation.
- You dont have to pay capital gains tax until you sell.
- Nobody has to know you have it if that matters to you.
- In worst-case financial scenarios, such as massive currency devaluation, you can use gold and silver to buy and sell. That may sound crazy but it has happened in other countries.
How To Invest In Physical Gold
Investing in physical gold can be challenging for investors more accustomed to trading stocks and bonds online. When it comes to physical gold, youll generally be interacting with dealers outside of traditional brokerages, and youll likely need to pay for storage and obtain insurance for your investment. The three main options to invest in physical gold are bullion, coins and jewelry.
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How To Invest In Gold
Part of gold’s appeal comes from its physicality: You can touch it and hold it. You can’t really hold a share of Johnson & Johnson stock. Way back in the day, ancient civilizations traded in gold because its malleability allows it to be easily turned into coins or jewellery.
Although its historically been a volatile market, gold has also proven to be a durable investment. Here are some tips on how to get started:
Is Gold A Good Investment In A Recession
Gold has a reputation for being a recession-friendly investment when the stock market has a big pullback, the price of gold often goes up. But that’s not the full picture, says Deaton Smith, a certified financial planner and founder of Thayer Financial in Hickory, North Carolina. The idea is that its a safer investment than equities, but the long-term price valuations just havent been there.
In fact, when you look at longer time horizons, like the past 30 years, the Dow Jones Industrial Average a good representation of the overall stock market has significantly outperformed gold. And while the stock market has its ups and downs, investing in physical gold can involve a lot of unexpected costs and considerations, including insurance and secure storage.
Adding gold to your portfolio can help you diversify your assets, which can help you better weather a recession, but gold does not produce cash flow like other assets, and should be added to your investment mix in a limited quantity and with caution.
» Stressed about the stock market? Heres what to do when the stock market crashes
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Should I Invest In Gold Futures
Probably not. If youre a wealthy risk taker who has an in-depth knowledge of the gold market and understands futures, then maybe you could have a punt, but we wouldnt bother!
However, given the points above that fears of a potential shortage of gold made futures investors demand a premium shows that actually owning physical gold could be a better and more lucrative option in the near future.
Also, join my investing webinars to get more knowledge and confidence in investing. Theyre cheap and fun to do, so see whats on offer in the next couple of months and come along to one or two of them!
*This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.
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Should I Invest In Bullion
Its a suitable option for most people who are looking to diversify their investment portfolio, although initial dealing costs for buying basic gold are high sometimes 5-6% or even higher every time you buy or sell.
Its best to stick to bullion gold bars when youre starting out with gold investments its only worth getting involved in the rare coins industry if you have sufficient knowledge of the subject. If you already have a fantastic security system at home then certainly consider buying physical gold. Otherwise its easier and safer to invest in vault storage traders like The Royal Mints vault where they look after the gold for you.
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Understanding Gold Weights And Trading Costs
Gold bars and bullion coins can be purchased according to weight and size.
Some cast gold bars are tiny and fit in the palm of your hand while other bars are much larger.
Bars are measured in denominations of grams, troy ounces, tolas, taels and bahts.
The Gold Bars Worldwide website offers a guide to buying and selling gold bars for beginners and has easy-to-use guides on gold in the About Gold section.
Small bars and bullion coins can be bought from dealers such as Spink at about 5% above metal value and sold back at 5% below value.
Dealers make it cheaper for customers who buy or sell in bulk.
When buying bars or bullion coins it is important to check that the dealer is reputable and the costs of insurance and storage fees.
Metal value
Metal value refers to the value of a coin only in terms of the pure base metal the coin is made from. In other words, it would be how much the coin would be worth if you melted it down for the gold it contained. This is calculated by taking into account various factors such as
- the weight of the coin,
- metal composition,
- base metal prices.
Selling Bullion
if you have gold coins or bars you can liquidate them by selling them to a dealer or on an online exchange.
Selling physical coins or bars at a dealers place would typically incur costs of around 6%
N.B. Dont forget tax!
A Brief History Of Gold
In order to fully understand the purpose of gold, one must look back to the start of the gold market. Gold’s history in society began well before even the ancient Egyptians, who started forming jewelry and religious artifacts. Yet, it wasn’t until around 560 B.C. that gold started to act as a currency. At that time, merchants wanted to create a standardized and easily transferable form of money that would simplify trade. The creation of a gold coin stamped with a seal seemed to be the answer, as gold jewelry was already widely accepted and recognized throughout various corners of the earth.
Following the advent of gold as money, its importance continued to grow throughout Europe and the U.K., with relics from the Greek and Roman empires prominently displayed in museums around the world, and Great Britain developing its own metals-based currency in 775. The British pound , shillings, and pence were all based on the amount of gold that it represented. Eventually, gold symbolized wealth throughout Europe, Asia, Africa, and the Americas.
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Investing In Gold Coins In Other Ways
You can even buy coins with your Individual Retirement Arrangement . You wont be able to take these coins home.
Your IRA administrator will keep them in a vault for you. Coins must meet standards of purity to qualify as IRA investments.
You can always invest in gold without actually bringing home any gold coins.
Who Is Investing In Gold
The World Gold Council reported that 2018 saw the highest level of annual central bank gold purchases since the suspension of the gold standard in 1971, as well as the second greatest annual total on record.
Countries continued to buy gold in record amounts in 2019, with China and Russia among those leading the charge their officially reported figures showing an increase of 62 tons and 73 tons respectively between Q1 and Q3. Turkey saw an increase of 91 tons over the same period a 230% increase on its overall holdings in 2017. Unreported figures could be significantly higher.
Analysts are predicting an unprecedented rise in central bank buying across Western Europe and European banks have also started to horde the metal all while making very positive statements on their websites about gold. Commerzbank calls gold an anchor of trust whilst the Dutch bank DNB describes gold as the ultimate reserve asset.
The super-rich are also moving into physical gold, much more so than they have in recent years.
Goldman Sachs have confirmed that the global elite are rushing towards bullion in preference to paper assets, their recent wealth management report saying:
To paraphrase a much longer report into plain English, the rich are buying physical gold, readying themselves for a potentially severe crash.
Its a reliable, dependable investment. It just so happens it could also save you in a crunch.
Gold Investor Guide
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How To Buy Gold Coins
You will come across two primary types of gold coins: sovereign coins and numismatic coins. A government mint typically backs sovereign coins with a face value, but their value as raw gold may be higher than their face value.
Numismatic coins, on the other hand, are usually more valuable as collectors items. Avoid numismatic coins unless you want to be a collector. Collecting rare coins isnt an easily liquidated investment since your coins wont be easy to sell.
For those who want to invest in sovereign gold coins, the best place to find authentic coins is from a government mint authorized dealer, who should have several different choices of sovereign gold coins. The most popular gold coins available include:
Like bars, you can buy coins locally or online. If you shop online, WholesaleCoinsDirect is a reputable site to check out.
Performance: Crypto Vs Stocks Vs Gold
As the image below shows, cryptocurrencies have outperformed other asset classes in 2020.
Even with just a $1k investment, the gains would have been impressive, especially if entry was timed last March when the prices of all assets were down. Heres the approximate performance for 12 months starting from 14 March 2020.
Of course, past returns do not guarantee that in future the dynamics will be the same.
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How To Buy Gold Bullion
Of course, the simplest way to invest in gold is to go out and buy some. But to make sure that you get gold at the right price — and in a form you can easily sell back when you want to cash in your investment — you need to make sure you are working with reputable gold dealers . The World Gold Council, a gold industry association, is a good source for trusted dealers and it lists them online.
Minted bullion coins are one of the most popular forms of gold bullion. Several countries mint their own gold coins in 1 ounce or partial ounce denominations. Some of the more popularly traded coins are American Eagles, Canadian Gold Maple leafs, Australian Nuggets and the most popularly traded, the South African Krugerrand. These coins are heavily circulated for investment purposes, because their gold content is guaranteed by their respective governments. While the coins have face value and can be used as legal tender, they are more frequently traded for their gold content .
When buying bullion coins for investment purposes, buy several coins at once, and buy the larger denominations . Dealers usually add more markups to their prices for smaller denominations and sales of small lots of coins . Avoid rare or numismatic coins , since they are more often bought and sold for their collectible value instead of their gold content .
Gold As An Inflation Hedge
Since the late 1960s, gold has increased on average by 5.7% per year, according to data from Ned Davis Research. That performance is well above the rate of inflation, which is why many individuals own gold as an inflation hedge.
Yet, gold has gone through long stretches when it has not kept pace with inflation. An investor who bought gold in 1980, when gold was selling for close to $1,900 per ounce in todays dollars has lost money on an inflation-adjusted basis.
The problem with holding gold as an inflation hedge is its returns are volatile. Some years gold does better than inflation while other years gold lags inflation.
Claude B. Erb and Campell R. Harvey studied the historical performance of gold as an inflation hedge and reported their findings in a paper titled The Gold Dilemma. They concluded, If gold were a perfect short-term inflation hedge, then the real price of gold should be constant and exhibit no real price variability.
Erb and Harvey gave an example of a Brazilian investor who bought gold in 1980 as an inflation hedge. Over the next 20 years, Brazil had an average annual inflation rate of about 250%.
What did gold return during that time? Gold lost 70% on a real basis, as quoted in the Brazilian Real. Gold performed better than holding cash denominated in the Brazilian Real, which lost close to 100% of its value. Still, gold was by no means a good inflation hedge because 1980 was a cyclical peak for gold.
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How To Invest In Gold And Silver: Precious Metals Investing Guide
Diversification is one of the most important things to get right when managing a portfolio.
When done properly, diversification can increase the rate of return you can expect from a given amount of total risk, or decrease the risk required to achieve a given rate of return.
When some assets are rising in price, usually other ones are declining, which creates opportunities for contrarian investors to cycle capital into those undervalued assets.
And in my opinion, having a small allocation to precious metals like gold and silver is a useful part of diversification, because they are partially uncorrelated with stocks and bonds and have different and unique risks and opportunities. There may be times where a larger allocation is tactically useful as well.
This article provides extensive info on how to invest in gold and silver for part of your portfolio, including the pros and cons of various methods.
Start reading from the beginning, or jump right to the section you want:
Overview Topics:
Should You Invest In Gold
The price of gold rose pretty steadily in the late 2000s and outperformed the S& P 500, so it’s understandable that investors are keen to hop aboard the gilded train.
But its also really important to remember that past performances do not guarantee future results. The price of gold is volatile, and can change very quickly and dramatically. So be aware that investing in gold always carries with it a potential for loss, which is why it should only form a small part of your portfolio .
In order to ensure youre properly diversifying your financial landscape, it can be helpful to work with a financial advisor that knows how to put together a portfolio that includes a wide swath of the market, including gold . Another option would be to choose a managed mutual fund that includes the possibility to invest in gold. Also keep in mind that gold itself doesnt produce any returns, so if you want to be earning dividends from your investment, stock might be a better option for you.
Curious to learn more? Get started investing with Wealthsimple and we’ll create you a diversified, low-cost portfolio. We offer state of the art technology and the kind of personalized, friendly service you might have not thought imaginable from an automated investing service
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Gold Funds Worth Considering
Rob Morgan at Charles Stanley says I would highlight BlackRock Gold and General as a good choice. It is actively managed and at £1billion is one of the larger gold equity funds available to investors. It also has an experienced investment team behind it.
The funds top investments include the worlds largest gold mining company, Newmont and Canada-based Barrick Gold. Its annual charges are 1.17%
Other gold funds you could consider include
- Ruffer Gold, iShares Gold Producers,
- Jupiter Gold and Silver
- Sanlam Global Gold Resources.
- Funds that are listed on the London Stock Exchange include BlackRock World Mining.
Also, Global investment trust Personal Assets run by Troy Asset Management has 11% of its assets invested in gold while Ruffer has just less than 7% of its portfolio in gold.
Gold Investments By Allocated Gold Accounts
An allocated gold account is similar to a traditional bank account. Instead of storing cash in your bank account though, you store physical gold. In an allocated account you own specific pieces of gold. These accounts are typically only offered to those with high net-worth and not every bank offers these types of accounts.
There is another form of these accounts known as unallocated accounts. In an unallocated account you own a portion of gold but you do no own a specific piece of physical gold. These accounts can be somewhat merky as the gold is more of a credit from the bank.
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