Gold As A Long-Term Investment
Gold, for as long as one can remember, has been perceived not only as a precious metal but also, as a valuable currency. With time, it has also emerged as a great investment option. Undoubtedly, gold is very crucial to one’s financial health, now more so, as the economy is more volatile than ever.
Investors have used gold as a way to protect their interests and wealth. Whenever, the market is shaky and price rises are imminent, gold has often come to the rescue of many.
As much as gold is popular and known to give profitable returns, one might still wonder, how does it perform as a long-term investment? And this is a most valid question to which we are here to provide an answer.
Gold acts as a hedge
What is a hedge? A hedge is basically a way for you to protect yourself from financial losses; it essentially works as a shield. What is gold a hedge against, you ask? Inflation.
Whenever the market is uncertain, gold investment witnesses a substantial rise. Inflation is everyone’s nightmare but it often does not impact gold much which is what makes investors sigh in relief. At the time of lows, investors invest in gold only to make a profit when the market booms. This is how gold works and acts as a hedge against market uncertainties and inflation.
Gold gives you options
When we say- gold is a great investment, we do not only mean physical gold, we are also talking about gold stocks. Both are not the same. When you invest in the gold stock, you are investing in stock and not physical gold and vice-versa. It gives you a choice to decide whether you really want to expose yourself to physical gold or not because if you do not like yellow, you can always avoid it by going for gold stocks instead of the actual physical commodity. Here, we also feel it pertinent to mention that gold or gold stocks, both are also a great way of diversifying your portfolio. So, you win either way.
Gold’s price is inversely proportioned to Dollar’s price
You read that right. Gold and dollar move in the opposite direction, which brings us back to our earlier point about gold being a hedge against inflation. Though, certainly, there are other factors involved and market obviously does not work on anybody’s will but its own, gold, in the long run, is often perceived as a safe option because of how its prices move up and down in relation to the dollar.
What are the downsides?
Gold price is inconsistent, so, it may not always work the way you want. Apart from that, if you are not investing in physical gold, there are always chances of you getting scammed, especially in a market that is crashing down. It is of utmost importance to be careful when investing in these “gold papers” because if you are not vigilant, you just get scammed.
Physical gold does appear better when thought about like that. But sometimes, it can be a bit expensive to buy because when you buy gold, unless it is a coin or brick, you may encounter mark-ups or premiums which are essentially the cost of transportation or labor. However, this same aspect may also make a certain piece or coin valuable if it is rare. The gold’s value may go down but at the same time, the rarity will still make you a profit.
Conclusion
There are obvious challenges to investing in gold but when weighed against the advantages, gold certainly wins as a long-term investment. It is a secure investment that can reap benefits, given you are careful and prudent while making these investments.
