Most people invest their hard-earned cash in gold to safeguard it from inflation and other currency risks. But is it worth investing in it? Gold has been used as an investment for the longest time, despite its fluctuating value. With changing times, people are adding gold portfolios as part of their assets because of its various advantages, while others are shunning it due to some disadvantages. Currently, gold doesn’t value the same it was some years back, neither do some currencies. This situation means you can invest in it with care while checking its fluctuation. Here are the pros and cons of having gold as part of your investment.
Pros of having gold in your portfolio
There are four main advantages of investing in gold, which has led the masses to this investment. These include:
A Quality Hedge against a Down Market
With the current fluctuating economies, the stock market is not as stable as it used to be. As seen in previous years, most people invested in gold after the stock market went down to safeguard their savings. Such also led to higher demand for gold, making its prices shoot higher. With the coronavirus pandemic and unstable economies, stock markets seem to go down soon, which will see gold prices going up due to increased demand. As an investor, this means adding a gold portfolio will see you reaping big when markets go down.
Gold continues having value as the paper falls
Gold rarely loses value, and if it does so, the margin is always unnoticed. Most local currencies are losing value worldwide, with some trading over a hundred times for a dollar or a sterling pound. It is not easy to stop inflation, given that the leading currencies are becoming more substantial. This depreciation leads to currencies losing their purchasing power. Instead of keeping this money in the bank, individuals invest it in gold to preserve its value since it doesn’t depreciate quickly. Any person holding gold of the same value as someone holding cash is better off with their savings.
There is an Upside to the value of gold
Gold rarely fluctuates. Before then, gold used to trade higher than now due to most economies stabilizing. With elections going on, hoarding of currency and packages offered by governments, fear is spreading across nations, which can end up spiking gold to a greater value. There is a high possibility of its value getting higher from its current curve.
Easy to buy and sell, and satisfying owning it
It is an easy process to buy and sell gold in any emerging market. Most countries have ready markets where you can buy and sell gold in the form of bars, coins, and other statues. Besides trading, owning this precious metal is so much more satisfying than having currencies of its worth.
Cons of having gold in your portfolio
Besides having the advantages, gold has its downsides, which you should note when creating your portfolio. Following are the disadvantages:
It has a terrible Historical return
Gold is a lousy investment if seeking future returns. Compared to other forms of investments such as bonds and stocks, it would be best not to invest in it if expecting returns on investments. The reason is that its value doesn’t change much, even after years.
It can become worthless if fortunes change
When many people invest in anything, its value decreases while that of currency increases. Such might happen to gold if everyone rushes into it. If all currencies lose their value to the minimum, traders will have to go back to barter trade, making gold useless. Another thing is that times might be worse, where gold won’t be a priority.
You only earn money by selling gold
Gold will not earn you anything unless you sell it. It is not like shares where you will be earning dividends or something from your investment. For individuals looking for a passive income from their investment, gold doesn’t offer this unless you sell it at higher prices.
Investing in it comes with a cost
Buying raw gold is another thing, and changing it into coins or bars is another expense. Most dealers will charge you for changing the raw gold into coins or bars, and most banks will charge you interest to store your gold. You might also end up getting fake or low-value gold during investing.
While there are disadvantages, the pros of having gold have more weight: It only depends on the reason for the investment. Investing to safeguard your value is the best choice to make, but investing in getting profits in the future is worth going for other profitable ventures.