Gold is one of the oldest commodities in the world and with the stock market going through a lot of turmoil, could this precious metal be the answer? Why do people invest in gold? Is gold an interesting investment for you? Alphastocks tells you!
Investing in gold is a 3,000 year old investment strategy. The yellow metal has some characteristics that investors cannot ignore. When governments print money, countries fight wars, or political uncertainty increases, stock prices can come under pressure. In these uncertain times, the demand for gold is growing. Is now the time to invest in gold?
Why invest in gold?
Gold has traditionally been viewed as a defensive investment. Defend the value of your savings against inflation and an uncertain future. The price of gold has risen more than 15% in recent weeks due to geopolitical uncertainty and 43% in the last five years. Consumer demand for gold has increased in recent years as people in emerging economies get richer. China and India together consume about ten times more gold than the US per year. And finally, it is difficult to produce more gold. Gold mining is expensive and slow. That combination of safety in a crisis, increased demand, and the difficulty of increasing supply makes gold an attractive investment for many investors.
How can I invest in gold?
There are three ways to invest in gold.
- Of course, it is possible to buy gold yourself, for example in the form of gold bars or jewelry. But for most of us, this is not practical. Above all, it creates a storage problem and puts you at risk of being robbed. Then you will have to find a secure storage yourself, which also costs time and money. It is not the most efficient way.
- The easiest way to invest in gold is through a gold fund. These funds store physical gold bullion in secure vaults and allocate a portion of that gold to you as an investor. The value of your investment is directly related to the price of gold and is backed by the fund’s direct yellow gold holdings. There are also funds available that focus on other precious metals such as silver, platinum, and palladium.
- The third way to gain exposure to gold is to target companies that have exposure to the price of gold. There are currently a number of publicly traded companies involved in or facilitating the gold mining industry.
Sounds good… Should I invest now?
Without a doubt, investing in gold can be a good way to protect your existing assets. But we think it should only be a small part of most investors’ portfolios. Although gold offers advantages such as protection against inflation and uncertainty, it is not without risks. First, the price of gold can go up or down. On the other hand, gold does not offer the long-term growth opportunities that corporate stocks can.
The goal of investing in gold is not to make your money go back 10 times, it is to balance your portfolio. It’s the investment you’ll be glad to have when everyone else sells everything. That’s why most professionals say a 5-10% allocation is adequate for most investors.
If you want to invest in gold, you need a reliable and cheap broker! Most shares can be purchased cheaply from DEGIRO or BuxZero.
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