Can You Hold Physical Gold?
Physical gold investments, unlike many others, are easily convertible to cash and portable; unlike real estate or art pieces which may only exist locally.
Holding physical gold in a self-directed IRA (though only certain custodians offer this feature) may seem like a wise investment strategy, so here are the top ten benefits to investing in gold.
1. It’s a hedge against inflation
Inflation remains a constant threat, and gold’s history as an inflation hedge speaks for itself. Additionally, it often represents long-term wealth growth by outpacing inflation rates over time.
investors should keep in mind that not all forms of gold are created equal. Some forms incur additional expenses like storage or dealer markup costs; while others require more complex management such as an ETF which must be purchased and sold on stock exchanges and may incur trading commission fees.
Physical gold provides an extra level of security and protection that an ETF does not. Governments tend to overreach during times of crisis, freezing bank accounts and garnishing wages; keeping some physical gold outside your jurisdiction provides protection from these aggressive political actions as well as diversification into your portfolio with something that doesn’t need feeding, fertilizer or water for growth.
2. It’s a store of value
Physical gold’s long history as an asset store makes it a smart addition to many investment portfolios. Gold can increase in value during times of crisis and is also an attractive alternative to paper assets like stocks and bonds because it does not pay out dividends or interest; rather, its inherent worth remains secure.
Physical gold investors must consider storage expenses and dealer markups that are typically higher than spot prices when making their purchases. Furthermore, their holdings must be insured against theft to minimize risks to their wealth.
One cost-effective and accessible method of investing in gold is purchasing shares in an exchange traded fund (ETF). Investors should keep in mind, however, that ETFs do not hold physical gold and may incur commission fees when trading them. They may also levy an annual expense ratio which deducts fees from your funds for administrative costs and management services.
3. It’s a form of insurance
Gold does not carry the counterparty risk associated with stocks or bonds, since it does not obligate someone else. This makes gold an effective hedge against economic and political uncertainties.
Physical gold in the form of coins and investment-grade bars is an excellent way to diversify a portfolio, offering lower or negative correlation with most financial assets to reduce volatility and boost returns.
Physical gold can easily be traded in for cash almost anywhere around the world and at any time – an unparalleled advantage compared to collectibles like artwork or jewelry which require professional storage services or can take longer to sell off on their own. Home storage may also prove costly and carry potential theft risks.
4. It’s a long-term investment
Many investors invest in gold for various reasons; some seek diversification while others view it as an inflation hedge. No matter your investment goal, physical gold makes for an excellent long-term asset.
Physical gold offers unique protections that many other investments do not, namely no counterparty risk. If the government confiscated your gold, no value would be lost; this reassurance can be especially crucial in times of economic instability.
Further, physical gold can be easily purchased and sold; though dealer markups and fees may apply when transacting it. Even so, this small cost comes at the price of having tangible wealth you can access on demand – something which gold ETFs do not provide. Furthermore, gold bullion stands out as one of the few investments which allows anonymity for investors; unlike virtually every other asset class.
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