You’re having a gathering with your family when your uncle starts talking about his new investment. Stocks, bonds and even real estate are all in his portfolio. He drops the bombshell, however: gold. Everyone’s eyes perk up. Birch Gold Group review? What about gold? Yes, kind of.
Since centuries, gold has always been a safe bet. It’s like a trusted friend who is always there for you. Gold will always be there to protect you, no matter what the economic situation is.
Why gold then? Gold is tangible. You can keep it in your hand, or even under your mattress when you feel paranoid. Unlike digital currencies and stocks that may seem like they exist within a cloud of uncertainly, gold is there right in your palm.
Let’s have a conversation about stability. The stock exchange is like a rollercoaster. It’s up one day, and down the next before you can even say “sell.” Gold isn’t a player in these games. It has a tendency to hold its value. In times of financial crisis, gold is seen as the safest haven.
Remember 2008? The housing market crashed like a toddler who has been overcaffeinated after Halloween. But gold prices skyrocketed during that time! Gold has a magic ability to thrive even when the world is in turmoil.
Let’s talk now about diversification. Imagine putting everything in one basket only to fall over your own feet. Spreading out your risk with a little shiny metal in your portfolio could help smoothen out returns and spread out risks.
You don’t want to jump into the gold pool without knowing the depth. You can invest in different forms of gold. These include physical bullion, such as coins and bars, exchange-traded funds (ETFs), mining stocks or futures contracts.
There are storage issues with bullion. Where do these shiny bars go? Is it in a safe deposit box at your bank? Or maybe behind the painting of dogs playing Poker?
ETFs can be more convenient. They trade just like regular stocks, but instead of tracking the price of companies they track gold.
The mining stocks are another option. Instead of investing in gold directly, you invest in companies that dig it up from the ground. These stocks can be very volatile as they depend both on the price of gold, and the performance of companies.
Futures contracts? The advanced version of futures contracts is when you are speculating the price in the future.
There are costs to consider, as nothing in life is free. (Except maybe the advice of your grandmother.) When you buy physical gold, you will have to pay premiums over the spot price plus possible storage fees.
The expense ratios of ETFs are usually lower than those of mutual funds. However, the management fees will eat away at profits over time.
Taxes are also important since Uncle Sam is always looking to make a profit, be it through capital gains from selling appreciated assets, or dividends that are received on a regular basis depending on the investment vehicle chosen initially.