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The current gold price and gold investing can offer investors more control on how to handle their money. And as much as there are advantages to this type of investment, there are some negatives that should be noted.
Those investors that seek high returns from their invested capital may be better off with stocks and mutual funds. Gold preserves capital but does not increase it. All investment tools are driven by the market sentiment which can eventually affect the value and price of the traded stocks, and thus driving the trend upwards to a bull market. Because stocks are such a huge market this is a reason why equities are still the preferred choice of traders and investors.
Gold on the other hand preserves capital and does not grow it. Most investors want their money to make money and not just sit in a vault. Gold’s value rises and falls depending on the demand. And though gold is noted for its security against inflation, the invested capital may not have higher amount than expected.
Another problem with gold is its storage. Unlike a typical investment where the broker handles stocks and bond’s safekeeping, the investor physically keeps the gold. This means that the investor has to purchase the necessary equipment such as a safe or a deposit box for home use, in order to store the gold. There is also the risk of theft or even a Monex fraud. If a third party like GoldMoney is used then storage fees may be charged.
Of course, this type of gold investment storage opens all doors for burglars and thieves to take an interest in entering your home. Any hint that gold bullion or coins are in your home can be enticing for criminals. This affects not only your safety but your family as well. This is certainly one risk that you should try to avoid.
Transporting very large amounts of gold can also be a problem for investor because of the weight and the bulk. Large gold bars or bullion cannot easily be carried in a purse or bag. For example, a 1 ounce gold coin is worth about $1,000. If you are moving large amounts, like a 400 ounce LBMA bar worth about $400,000 then it would weigh about 28 pounds. This may hinder you from making transactions that involve commuting from one place to another.
Choosing the right format of gold can also be a problem. Sometimes it is rather simple to have one investment format to choose from. Stock investors will not have a problem in keeping stock certificates of ownership since most are either electronic or in paper form. Gold has a plethora of options that can sometimes be confusing for the investor. Having many options does not simplify investing. It may be better if there is one format, like stocks, that people can choose from.
Investing in gold may not actually be the perfect choice for some. If you prefer high-returns in your investments, then gold is not for you. Not every investment is perfect, and though the hype about gold protecting your capital is true, factors such as your personal safety, storage fees, etc. play an important role in taking this risk.
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- Disadvantages of Saving in Gold
- Advantages of Gold Investment
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- Gold As An Investment
- Gold Investment – Savings Options
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