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When it comes to wealth increment, choosing the right investment vehicle is vital to the attainment of the expected return and portfolio growth. While all investments are perceived to contain a certain degree of risk, there are those that are nearly immune to inflation. Such investments include rare and highly valued commodities such as gold and silver.
Since the origin of money, gold has been seen as the ultimate store of value due to its scarcity and ability to maintain value during inflation. Even though its prices may temporarily be affected by market volatility, gold is known to stabilize and regain its value in the long run. This makes it a stable long-term investment vehicle. Here are five reasons as to why you should invest in gold this year and how to get started.
A Hedge Against Inflation
With the falling oil and base metal prices, the unstable Chinese economy, and an increase in global terror threats, there are no uncertain times in the economy than today. Under this circumstance, storing your wealth in fiat money might not be the most prudent investment decision. Buying physical gold nuggets, on the other hand, can help you protect your wealth in times of economic turbulence. This is because it is valued in United States dollar ($) which accepted as a global currency due to its stability.
As a beginner in physical gold investing, the Gold Eagle coins are the best option because they can easily be bought and liquidated through precious metal dealers. For short term investors, the gold bullion coins might not be the best investment due to their volatility. To make a good return on gold coins, ensure that you hold them for a minimum of two years.
Reduction in Portfolio Risk
As a risk-averse investor, minimizing your portfolio exposure to loss during economic uncertainties should be your ultimate goal. Given its resilience to adverse economic events, gold is among the less risky investment vehicle to include in a portfolio. Unlike other investments, gold appreciates when there are high inflation and financial instability. This makes it the best vehicle to neutralize portfolio risk. Its negative correlation with the USD makes it more valuable when the currency is declining in value.
As an investor, determining the amount to invest in gold will significantly influence your portfolio risk. For instance, most successful investors prefer a 10% of their portfolio to consist of physical gold.
An Ability to Stabilize After Turbulent Markets
As mentioned earlier, investment in physical gold is not for short term investors. This is because it’s prone to short-term price fluctuations. However, after the markets stabilize, gold is known to regain its expected value. This means that there is a lower risk to long-term investors when compared to short-term investors. Given the easy access to gold bars and coins, you can start your investment with as little as possible and build your wealth to greater heights.
A Universal Acceptance
In today’s highly uncertain markets, gold is among the universally accepted store currencies. An investment in gold minimizes the risk specific to a particular economy. For instance, in a country whose currency is constantly losing value, gold is the best store of value since it can be liquidated in another currency.
As a beginner investor, accumulating small collections of gold bars and coins can be one of the best moves of investing for the future. Having a long-term outlook will help you focus on getting the most out of your investment.
The “spread” is the difference between the buying price and the selling price. Unlike paper investments, gold and other precious metals have a large spread. When coupled with its low inflation risk, gold is a great investment vehicle. However, the cost of holding physical gold can at times offset the high spread. For a good investment decision, an investor should weigh the cost against the return on the investment.
As the tensions in the Middle East escalate and the Chinese economy continues to weaken, the demand for gold is likely to rise as investors opt for it as the safest investment. The increase in demand is likely to increase its price as events continue to unfold. For investors, this might be the best year for investing in gold.