At a family reunion, your uncle begins to ramble about his most recent investment. He’s got everything: stocks, bonds and real estate. He then drops the bombshell – gold. All ears are perked up. Birch Gold Group? What do pirates use to bury treasure in chests? It’s sort of true.
Gold has been used for centuries. It is like an old, reliable friend who will never let you down. Gold is a reliable friend that will never let you down, whether it’s an economic downturn or a spike in inflation.
Why gold? Firstly, it is tangible. It is tangible. If you are feeling paranoid, you can store it under your bed. You can hold it in your hand, unlike digital currencies or stocks, which may feel as if they are in a cloudy, uncertain fog.
Let’s discuss stability. The stock market can be a rollercoaster. You’re up one day and then you plummet faster than you say “sell.” Gold does not play these games. It holds its value well over time. People flock to gold during financial crisis because they see it as a haven.
Remember 2008? Remember 2008? During that time, gold prices were soaring! It’s as if gold somehow has the magical ability of thriving when everything else is falling down.
Let’s discuss diversification. Imagine having all your eggs in a single basket, and then falling over yourself. Adding some shiny metal to your portfolio can help you spread out the risk and possibly smoothen returns.
Do not dive in without checking the depth of the pool! There are many ways to invest gold, including physical bullion such as bars and coins, ETFs (Exchange Traded Funds), mining stock and futures contracts.
The storage of physical bullion is not ideal. Where will you keep your bars of glittering gold? Where do you keep these bars?
ETFs make it easier to trade. They are traded on stock exchanges like regular shares and track gold prices instead of owning companies.
Another option is to invest in mining companies, rather than directly buying gold. These are volatile, as they are based on both gold prices and company performance.
Futures contracts: This is advanced level stuff. You’re speculating about future prices.
We’ll now discuss the costs, since nothing comes for free (except maybe grandma’s advice). You will pay a premium over spot prices for physical gold, plus storage fees if your choice is professional vaults rather than DIY solutions using sock drawers.
While ETFs have lower expense ratios than mutual funds, management fees can eat into profits over the long term. Mining stocks could involve brokerage commissions and risk tied directly to operational efficiency within respective firms.
It is important to mention taxes, since Uncle Sam likes to get his cut. This can be in the form of capital gains when selling assets that have appreciated or through dividends paid out periodically based on which investment vehicle was used initially.