What are the pros and cons of investing in gold? Do the pros outweigh the cons, or do the cons outweigh the pros? Is it a good idea to invest in gold today? These are some typical questions that most people who are considering investing in gold ask. If you have also been asking yourself such questions, then today you’ll get all the answers you need, so that you can make the right decision on whether to invest in gold or not. Read on till the end to find out more.
Introduction to investing in gold
With the present state of today’s economy, you should be thinking about the most effective strategies to increase your income for use in the future without exposing yourself to unnecessary risks. Some investors have chosen to put their money in paper asset investments, which present their unique pros and cons. There are also those who have decided to add physical precious metals to their investment portfolios, owing to the fact that they are tangible, and that they offer immense value on a long-term horizon. What makes such investors put their money into gold investments? Here are the main pros and cons that they consider when making their decision.
Pros of investing in gold
Gold is a long-term store of value
The performance of gold as an investment asset has withstood the test of time. It is, as such, viewed as a long-term store of value. If you are getting started with investing for your retirement years, or you simply need assets that you can leave your children then gold is worth considering. Gold has been around for thousands of years, and its value has been gradually increasing, which makes it a good option for those who also want to invest with the future in mind.
It is an inflation hedge
The main reason why gold is a long-term store of value is that its value is inversely related to inflation. As the purchasing power of paper currency is going down, the price of gold goes up. This may be as a result of the tangibility of gold, as well as its unique and valuable properties.
To maximize the benefits of gold as an inflation hedge, you need to invest in physical gold, not in paper gold (gold ETFs, funds, options, stocks, and futures). Those who invest in paper gold do not own the assets. This means that if the worst comes to the worst, that they will not have any assets to their names.
Another reason why investors add gold to their portfolios is for the purposes of diversification. As the ancient saying has it, you should not put all your eggs in one basket. Adding gold to a portfolio that already has other paper assets is an excellent hedge against the risks that result from the ups and downs in the global economy.
The occurrence of the 2020 pandemic showed us that even the highly sought-after and non-traditional assets such as real estate, do not hold up very well in the face of a global crisis. A close look at the price trend of gold will reveal to you that this precious metal was stable all along, which is why it is important to have it in one’s investment portfolio.
Gold has gradually become a popular investment asset. This has led to the creation of more platforms on which gold buyers and sellers can interact. Such is a development that has made it very easy for investors to convert their gold investment into cash- this is referred to as liquidity. Highly liquid assets are very important since they give you the choice to invest to use the money you invested, whenever the need arises.
The cons of investing in gold
Huge capital requirements
Depending on your financial objectives, you may need a lot of money to invest in gold as a retirement investment asset. If you want a huge profit margin from investing in this shiny metal, then you must be ready to pump in a significant amount of capital. Those who simply want to diversify their investment portfolio can invest using a considerably lower amount of money, by investing in the more affordable gold coins.
Specialized storage and insurance
Gold is a very valuable asset, which makes it very prone to theft. This is the reason behind the need for specialized storage when it comes to owning gold. If you are investing in gold for the purpose of retirement, the IRS dictates that you cannot hold your physical metals in a safe at home, or in a hole in your backyard. You need to ensure that your gold coins or bars are guarded well.
Depending on the nature of your investment, you can have the gold stored in an IRS-approved depository that specializes in the storage of gold and other precious metals, or you can have it stored in a bank. In each case, you need to be ready to meet the storage costs, which in most cases include the insurance costs. If you do not choose the right company, then you will end up paying very high fees, and this can ultimately eat into you’re the value of your gold investment.
If you are highly considering opening a gold IRA to invest in gold and would like to do so through a company that offers quality services and does not overcharge you, check out the recommended gold IRA companies below:
That will be all for today’s article on the pros and cons of investing in gold. What are your thoughts about this shiny metal? Do the pros outweigh the cons from your point of view? Would you consider investing in gold after having read today’s article? I would really love to know where your mind is with these questions. If you also have more questions for more with regards to today’s topic, or about investing in gold in general, be sure to drop them in the comments section so that I can get back to you.
I wish you well,
Eric, Investor and Team Member at Gold Retired!