Why is Gold a Good Investment?

investment in gold
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Are you saving money for your future? Do you have a portfolio of stocks, bonds, real estate, cryptocurrency, or other assets? Does your portfolio include any precious metals?

If not, perhaps you should consider adding some gold investments.  Let’s talk about why and what you will need to know to make a good investment decision:

  • Why is gold important?
  • Gold Investments
  • Why should you be investing in gold?
  • FAQ
  • Summary

Why I like Advantage Gold:

Advantage Gold is an industry leader in precious metal IRA rollovers. 

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Fees: $225 year

Minimum Investment: $25,000

Promotion: Invest $50,000 (waives all fees for the first year )

Why is Gold Important?

Gold is used as a store of value. Since ancient times, gold has been associated with the gods, immortality, and wealth. Even in today’s world of multiple investment classes (some even electronic!), gold still has a place.

Gold was a store of value against most of the world’s currencies for many years. For example, gold was a foundation of value for the US Dollar (the world’s reserve currency) until the US went off the gold standard in 1971.

Now the dollar’s value is no longer based on gold’s value.  Industrial applications often use gold. It is an excellent conductor of electricity and very easy to form into shapes due to its purity.

Gold doesn't corrode or tarnish, enhancing its reputation as a symbol of wealth.

Gold Investments & How to Buy Them

Today, gold is available in many forms, each with its pluses and minuses, such as:

  • Gold Bullion (coins and bars)
  • Gold Futures
  • Gold ETFs 
  • Gold Mining Stocks
  • Gold Mining Stocks ETFs

You can purchase gold bullion from online gold brokers, local coin shops or collectors, pawnshops, or as an ETF on the stock exchanges. It is essential to keep your physical gold protected in a vault or a home safe to prevent unintentional loss or theft. 

Gold futures use leverage to control a large amount of gold with a small amount of money and make a profit quickly. But the risks are high.

Just like trading stocks on margin, if the price of your investments moves in a negative direction, you can take significant losses. High risk, high reward.

Exchange-traded funds (ETFs) are a convenient way to obtain controlling interest in gold. There’s no need to safeguard it like bullion, and ETFs can be traded easily on the exchanges (hence the name).

Just be careful of commission fees when buying or selling ETFs.  Why not go to the source? Mining stocks are a speculation play, like panning for gold yourself in a stream.

But due diligence is important. Purchasing a mining stock can be just as risky as buying any stock. Some go boom, and others go bust.

It’s possible to combine the best of mining stocks and ETFs by buying (you guessed it) ETFs that own mining stocks. Buying an ETF of this kind can diversify your holdings with a variety of gold-producing companies. 

Be careful with the high expense ratios of some of these funds, however.

Why Should You Invest in Gold?

How much of your portfolio should you invest in gold? Typically around 5 to 10% of your total portfolio value should be gold. As your portfolio grows, you should rebalance the amount of gold no differently than you would rebalance stocks or bonds.

One US dollar today is worth far less than that same dollar 10 years ago due to inflation continuously eroding the value of world currencies for decades. 

But gold does not lose value as quickly, so it’s used as a hedge against inflation. If the dollar’s value decreases, gold’s value will not, at least not to the same degree.

Gold will always have value. Stocks and bonds can go to zero. Currencies can collapse due to government policy or other economic disasters.

Different cryptocurrencies can fall out of favor and replaced with other cryptos. But gold’s value will remain fairly stable through it all.

Summary

Gold isn’t going anywhere. Every civilization in history valued gold, and that continues today. Even now with more asset classes available than ever before, gold still has value.

And it still has advantages over many other assets, although there are disadvantages too.  Gold will hold value, but it does not generate cash flow.

If wealth preservation is a priority over wealth generation, then gold can serve your needs well. Your needs will mostly depend on your age, the age and nature of your other non-gold assets, and outside market forces.

You may prefer a particular type of investment depending on your financial position, but for many people, gold can be a valuable part of their portfolios.

It may be worth your time and money to investigate if gold is right for you. If you already know that it is, get some today!

Gold Investment FAQ's

What are three benefits of gold?

  • Gold has no counter-party risk. It does not depend on a company paying dividends owed to you or another party not fulfilling their obligation for you to receive value. Gold’s value is inherent in itself.
  • Gold holds its value. When all other asset classes are down, gold is often up. Of course, the inverse may be true also. Still, stocks and crypto are far more volatile than gold.
  • Gold’s demand is constantly increasing. The relative scarcity of gold also contributes to its demand and value.

Is gold a good long-term investment?

  • Gold acts as a safety net when markets are in decline. Investors often turn to gold when stocks fall.
  • Depending on the timeframe, gold can outperform stocks, especially with short-term market declines. However, over very long-term timelines, stocks have outperformed gold.

Is gold worth buying as an investment?

  • Gold can add balance to other assets in an investment portfolio.
  • Gold can preserve wealth. In times of political and economic uncertainty, we use gold to transfer wealth away from unstable currencies.  Gold will often outperform other investments under these circumstances  .
  • Gold will never be worthless. As long as there have been humans, humans have valued gold.

Advantage Gold

Rolling over your existing retirement account is an easy process, and Advantage Gold empowers you to make your own investment decisions.

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