VP at Guildhall Wealth Management aims to dispel main misconceptions around investing in gold bullion
Jeremy Wiseman is VP at Guildhall Wealth Management and, at a time when many investors are looking to add stability to their portfolio, takes aim at a number of misconceptions around gold.
Investors and savers alike are looking to gold to add stability to their portfolios. Those who are new to this type of commodity investment are likely to come across plenty of information (and misinformation) about investing in precious metals. This article aims to dispel five commonly held myths and inform investors so they can realize the benefits of investing in gold bullion.
Myth #1: Gold is only for wealthy investors
This myth is easily busted, as investing in gold bullion doesn’t necessarily require great wealth. Unlike some securities markets, gold (and silver) is particularly suited to all investors no matter what their portfolio size or experience level. A reputable gold investment firm makes it possible for their clients to purchase gold in very small increments, making acquisition approachable for a wide range of investors.
Myth #2: Gold is a risky investment
Risk can mean different things to different people. Most investors consider risk in terms of loss of capital or sluggish performance of their investments. This commonly held belief about risk, however, is typically associated with investments that are based on paper currency valuations or equity markets. Gold on the other hand has not only proven to be a consistent investment over time, it has value as a hedge against those traditional higher-risk investments like stocks and bonds.
Myth #3: Gold does not pay dividends
Like any asset you lock in a vault, gold will not earn interest or dividends. But to suggest gold doesn’t have earnings completely misses the point. Gold is money and not intended to pay out dividends. Buying and holding gold is a store of value, unlike investing in stocks, which is speculative in nature. Over time, gold’s capital appreciation has proven to be many times faster than the interest yields of interest-bearing investments, which are subject to risks beyond the investor’s control.
Myth #4: Rising interest rates are bad for precious metals prices
The affect that an interest rate increase has on gold, if any, is unknown. In fact, studies show that there is little correlation between interest rates and gold prices at all. Not to mention that gold and silver experienced one of their greatest swells during a period of rising interest rates between 2004 and 2006 when interest rates shot up from 1% to 5% and the value of gold rose concurrently.. Interest in gold continues to rise in the wake of the coronavirus crisis and the recession that followed. While interest rates can rise and fall, gold remains one of the most effective tools to safeguard against unexpected fluctuations, because it holds its value.
Myth #5: Mining stocks have more potential than physical gold
Historically, mining stocks and physical gold have paralleled each other except in the rare conditions where market fluctuations cause mining stocks to react drastically. In down markets especially, this has tended to see mining stocks drop much faster and farther than physical metals. In these cases, investors will be glad to have chosen gold and silver bullion.
These five myths share one important aspect, that when evaluated against the facts, they don’t hold up to scrutiny. Investors who take the time to investigate the benefits of bullion will quickly realize the opportunity to add an asset class that diversifies their portfolio, protects against inflation, and has potential to provide returns on par or better than traditional securities, such as stocks and bonds. With these myths busted, informed investors are one step closer to enjoying the benefits of purchasing gold and silver at today’s prices and realizing their future potential.