Is investing in gold really wise?
Gold has always been a popular investment, especially in times of economic uncertainty. Gold has been considered a valuable commodity and a safe haven for investors for centuries. But is it really wise to invest in gold? In this blog, we discuss the pros and cons of investing in gold and give you some more important tips to consider investing in gold.
The benefits of investing in gold
Value retention: Gold is considered a safe option for investors because it retains its value. Throughout history, gold has already proven itself as it has always retained its value in times of political and economic instability.
It also protects against deflation. In times of economic crisis, other investments often drop in value. Gold, on the other hand, often retains its value or can even increase in value, protecting your investment portfolio during periods of economic downturn.
Liquidity: Gold is a highly liquid asset. This means you can easily buy and sell it. So do you want quick access to your money? Then gold is definitely an interesting option. It also has international liquidity because it is recognised as valuable all over the world. So you can trade it anywhere and convert it into different currencies.
Did you know that besides investing in physical gold, you can also invest in gold mining shares or gold ETFs, for example. This way, you can invest in gold without having to worry in the storage and insurance of gold.
Diversification: Gold is an interesting option to diversify your investment portfolio. It usually has a low correlation with other assets such as equities, for example. Thus, gold allows you to better diversify your investment risk as it protects you from the volatility of financial markets.
Disadvantages of investing in gold
Passive investment: Unlike shares or, say, real estate, gold does not generate income. It is therefore a passive investment that depends on the change in value of gold itself. Therefore, as an investor, you have to trust that there will be a rise in value to make a profit.
Storage and insurance: When you invest in physical gold, you obviously need to be able to store it safely. Especially if you choose to store your gold at home, you need to take extra precautions against theft or loss. However, these precautions come at an additional cost.
Volatile investment: Although gold retains its value, it is obviously not immune to price volatility. The price of gold can fluctuate widely in the short term and often depends on various factors such as: supply and demand, economic conditions and geopolitical events. Due to these strong short-term fluctuations, it becomes difficult to determine whether it is a good time to buy or sell.
Additional tips when investing in gold
Spread your portfolio: Gold can be a nice addition to your investor portfolio. It is recommended anyway to spread the risk when building an investor portfolio. For gold, the advice is usually that between 5-10% of the total portfolio should be invested in gold.
Consider the form of gold. As we mentioned earlier, you can invest in physical gold, but also via gold ETFs and/or equities. Each form has its pros and cons.
Conclusion
Investing in gold can be a wise move for investors looking for diversification and protection against economic uncertainty. It has historically retained value and can act as a safe haven during times of volatility. However, it is important to consider its drawbacks and risks, such as the absence of income and price volatility. If you choose to invest in gold, you should construct your portfolio carefully and consider the different forms of gold. As with any investment decision, it is wise to seek advice from a financial adviser before making a final choice.
Do you want to invest in gold? Then be sure to check valueshop.eu to start your investment adventure.
