Gold Investment Advantages And Disadvantages

Gold Investment Advantages And Disadvantages

Gold is and has always been a valuable metal in terms of wealth measurement. Gold has many different uses, from making jewelry to decorations and, most important, investment. Investing in gold has lots of benefits, one being, it can withstand economic constraints.

No matter how long it may take, gold will always retain its value. Therefore, whenever there is a rise in inflations or fall of currency value like the US dollar, individuals will always go looking to invest in gold. It is a secure way they know that their value is retained.

The primary reason why Gold investment is common is its liquidity. You can easily buy and sell their assets, and gold makes the work easiest. However good, there are some advantages and disadvantages associated with gold investment. Let’s take a look.

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Gold Investment Advantages And Disadvantages

Advantages of Gold Investment

1. Liquidity

The most important thing to look for is the ease of buying and selling your assets for any investor. Gold investment offers this advantage on a platter for all investors. Gold is easy to convert into cash anytime you want. If you compare gold investment to other types of investments, gold has a high level of liquidity.

Having liquid assets is always an added advantage for any investor. Liquid assets offer you the option of spending your assets. This becomes convenient at times when you may need huge sums of money but have fewer savings.

2. Security of Value

People invest for the primary reason of gaining profits; otherwise, you can choose to keep your money in your house. The gold investment will assure you of value security. In addition, deciding to invest in gold has an assurance that the prices will go up over some time.

In the next ten to twenty years, gold is going to be more expensive. Other types of investments' prices are bound to go up and down depending on the economy's inflation. Gold investment, however, offers you security. The increase in value will ensure that your investment is always protected, no matter how many years it may take.

The prices of gold may go down sometimes, but it is always a guarantee that they will shoot right back up. This is because the prices of gold are not affected by inflation in the economy. Instead, when there is inflation, investors rush to invest in gold because its costs are much greater than any inflation rate.

3. Simplicity

Gold investment is the most accessible type of investment that even newbies can master. No one needs the experience to be able to know how gold investment works. However, talking to a financial analyst or broker will give you an endless list of unnecessary inconveniences of gold investment.

A broker will never be open enough to tell you how easy it is to invest your money in gold. Millions of gold dealers around the world are only waiting for a buyer so that they can sell their gold to them. You can buy gold in three forms;

  • Bullion bars
  • Jewelry
  • Coins

Storing your gold assets is also pretty easy; all you have to do is go to your local banks and get a safety deposit box. If your gold cannot fit in a safety deposit box, you can get as many deposit boxes as you want. You can store all your gold in there and have a guarantee of maximum safety and convenience. In addition, you can quickly assess your gold anytime you need them.

4. Hedge Against Disasters

Investing in assets like real estate, bonds, stocks, and mutual funds can be pretty unpredictable. Should a disaster strike, you don't know what will happen to your assets, houses. For example, they can be damaged by floods or an earthquake. However, with gold investment, the fear of disaster damage is minimal.

If anything happens like a market crash, your mind will be at peace knowing that your investment is safe. Therefore, global meltdowns and financial crises cannot affect gold negatively. Instead, gold prices will rise, bringing in more investors hence more money for you.

5. Inflation Hedge

An investor’s worst fear is inflation because it always affects the value of money. When there is inflation, the value of the dollar falls. For example, if you compare the price of a house in the US in the past twenty years, you will be shocked to see how much it has risen. In such a case, do you say that the value of the dollar fell or the value of the house appreciates?

However, when you look at the scenario in terms of the value of gold, you will realize that a house costing thousands of dollars can be bought with just a few ounces of gold. This is because the purchasing power of gold has remained stable over the years as inflation swipes away investment money. Thus, as the value of money depreciates, the value of gold appreciates. This, in turn, makes gold prices greater than any inflation rate will ever be.

6. Offers Different Investment Options

Investing in gold can take up different options. As an investor, you can pick the one you feel best suits your investment in gold. First, you may decide to invest in;

  • Jewelry-whether you decide to indulge in buying gold jewelry, you already become an investor. Moreover, buying gold jewelry can give you reasonable prices as you can stumble upon a historical piece whose price increases with its age.
  • Second, you can invest in exchange-traded funds. This type of investment works like stocks. Also known as the ETSs, it allows an investor to trade in gold without getting a physical possession, except you get trading fees and commissions.
  • The third one is gold bars, also known as bullion. If you want to invest in gold bars, you have to buy them from retailers at a discount or commission.
  • Lastly, there are the stocks. For any investor, stocks are the best choice you can make. As a result, many gold mining organizations are willing to offer their listed stocks for investment.

7. It has Good Portfolio Diversification

Any investor knows best to diversify their investments to protect them from inflation. Putting your money in gold is the best way to achieve this diversification. Unfortunately, gold has an inverse relationship with the stock exchange. When gold prices go up, the currency value goes down.

Including gold as part of your diversified portfolio helps protect you from bankruptcy in difficult situations like a stock market crash.

8. Gold Has Long-term Value

The value of gold has been a consistent one in the past years. The consistency make is regarded as the most stable currency over the years and still years to come. So if you are thinking of retirement plans or inheritance for your children, gold is the best way to go.

9. Gold Holds Its Value for Longer Periods

Gold can stay for very long before its value appreciates or depreciates. The prices may fall, but the actual value of gold will never change. This is possible because gold is a commodity. However, the currency's value may fall, changing the true value of money for a specific region. This is because money has no intrinsic value like gold.

Gold Investment Advantages And Disadvantages

Disadvantages of Gold Investment

1. Requires Large Capital

Investing in gold requires large amounts of money as the prices of gold are also high. But, just like you would make sacrifices to invest in real estate, you should also sacrifice investing in gold. No matter how expensive it may be, you have a guarantee of maximum returns.

Some additional charges come with investing in gold. For example, you need to buy or pay to store your gold assets like jewelry or bullions. Keeping your gold in banks will require you to pay an annual maintenance fee, including the premium and policy fees. If you don't prefer the bank, you may decide to store them at home. You will then need to buy a heavy-duty safety box which might be pretty costly insurance included. After that, the safety box must be maintained at least monthly to ascertain that it is still secure for your gold.

2. Lacks Constant Flow of Cash

Investing in gold does not have a passive profit, and it doesn't give you dividends. The only way you can make money from gold is by selling them. Investing in gold needs individuals with patience. The best way to get good returns is by investing for the long run as market fluctuations rise after some time. If you need quick cashback, investing in gold is not where you want to put your money.

3. Taxes and Premiums

When you decide to buy gold, you will be paying a premium which is more like the current market price. The premium will affect you in a way that when the gold value goes down, you will get losses. The losses you get will be equal to the current value of gold. Then there is the tax. Whenever you sell your gold and earns a profit, you will be required to pay a tax. The IRS current rates are at 28%, which is the maximum.

Concurrently, if you buy gold stocks, you will need to pay the regular capital gains rate. Therefore, there won't be any need for you to pay IRS rates. However, if you decide to invest in ETFs, you must pay the collectible rate.

4. It's Not a Passive Income Asset

As an investor, you expect that your investment should give you an income, right? Well, investing in gold does not provide payment. When you own bullions, for example, how will a solid metal give you income? If you are investing with the intention of becoming wealthy, then gold is not the one for you. Instead, look for an investment with a guaranteed income like a piece of land.

5. It's Prone to Fraudsters

Fraudsters are common in gold markets; some may offer you fake gold or simply a coated metal. If you are looking to invest in gold, then do your research correctly and take your time. Do not make hasty decisions putting your money at stake. Before you buy gold, try and find reputable dealers, the ones everyone is talking about. Try as much as you can to avoid losing your money to scammers. Go with a trusted gold company.

Bottom Line

If you’re looking for a lifetime investment, then you should invest in gold. Gold has survived price inflation over the years, which makes it a good fit. In addition, the gold investment comes in varieties which gives you the opportunity to choose the one that suits your capital and preference.

However, investing in gold comes with its risks which you should be aware of. For example, you need a decent amount of capital if you want to invest in gold. You should also consider how you will get storage for your gold bars or gold jewelry. At the end of the day, your investment security is paramount. Therefore, look for a storage facility that will offer your maximum investment security.

If you put all the risks involved into consideration, gold investment will never disappoint. It's one of the best investment you can put your hands on.

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