Long before the recent global financial meltdown, investors and economists were fully aware of the value of gold as an indispensable investment item. Gold investment is however not something that is seen as a traditional use of gold. But should you invest in gold? If so, why and what factors should you consider as you do so?
Stability
Over time, gold has proved to be a more stable store of value compared to currencies. If you are holding Dollars or Euros, you will have to worry about sudden loss in the confidence in the particular currency. You may have seen that many countries which had indicated that they would like to hold more of the Euro have backed off once they saw the collapse of the Greek economy. When you look at the stock market, you will
realize that the market can crush overnight and turn billionaires to paupers, however, such a thing has never happened in the gold market.High Liquidity
Gold is a near money issue. Unlike other assets such as real estate, gold is considered as near money, and therefore, it is something that you can easily dispose off when you want real cash to help you sort out your own business.
Diversification
Gold provides an investment option that is totally suitable for people who would like to diversify. If you hold several stocks and you would like to diversify your investment so as to minimize your risk, gold investment should be one of your considerations.
Disadvantages
Despite the fact that gold investment has all these advantages, it is important that you also take note of the fact that it has also its own disadvantages, which are the following:
Low Returns
Generally, the low risk assets are usually low returns assets. This means that you should not expect to get extra rich through investing in gold. The essence of most gold investors is just to store their wealth in form of assets that will beat inflation.
Another disadvantage of investing in gold is the fact that this may cause an increase in costs associated with the storage of the said gold. Unfortunately, there are usually no dividends that will accrue so as to carter for this cost of storage.
Factors To Consider
Before investing in gold, you need to look at the following items for you to know that what you are doing is okay.
General market trends: Check out the market trends. If the market is bullish, then you would do well to increase your investment in stocks and reduce yours in gold. However, when you see that the market is sliding, then take gold
Investment objective: As mentioned, gold is usually taken as an insurance against decline in the stock market. It is therefore a safe asset, but not really a rewarding asset. Its value usually increases dramatically only when there has been a loss of confidence in stocks. Therefore, your degree of risk aversion will determine how much gold you will invest in.
Regardless of the disadvantages of the gold investment, it is important to say that if you want to invest in gold, then that is probably one of the things that you ought to do. Just invest in it.
Danial Harris is manages and writes for a personal growth website, http://SuccessESource.com. Learn more about gold investments at http://Articles.SuccessESource.com.
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