From time immemorial, the primary concern among investors has been centred on maximizing returns on their investments. Likewise, gold investors are also concerned about returns, and, additionally, the stability of gold price and its liquidity. The parameter for ascertaining if investment in gold is a good decision is, however, not limited to return maximization, price stability and liquidity.
Furthermore, weighing the pros of gold investment against its cons equally helps to decide if gold is a good investment or not. Consequently, before embarking on gold investment in 2019, it is necessary to consider the following pros and cons of the decision.
PROS OF GOLD INVESTMENT
- It provides a hedge in periods of inflation
The value of gold can withstand the harsh conditions of inflation. This is contrary to investment in financial assets whose value diminishes during periods of inflation and even in times of unfavourable political conditions.
Of all precious metals, gold remains the rarest. Its scarce nature makes it valuable. Further, its scarcity and the ever available demand for it mean its value will continually appreciate.
- It serves as a diversifier
Rather than focus in the direction of financial assets only (for instance, stock), it is safer to broaden the scope of investment. Thus, investment in gold comes in handy as a means to expand or diversify investment. Additionally, the value of gold increases or is maintained when the financial market experiences a downturn. Hence, the gold investment gives the advantage of financial security.
- Ease of investment
Gold investment is relatively easier in comparison to other investment options. However, the ease of gold investment is a secret which brokers and financial analyst rarely reveal. Similarly, upon investing in gold (for example, a gold bar), securing the gold is also easy. Often, deposit boxes are used to acquire physical gold. F
CONS OF GOLD INVESTMENT
- Minimal return
In contrast to stock and even properties, the value of gold does not appreciate fast in the long term. Nevertheless, gold is a safe investment decision with a distinct ability to overcome unfavourable economic and political conditions. However, it will accrue less return when invested in the same period as bond or stock.
- Zero income
The ownership of physical gold does not yield returns or passive income. There is no doubt that a wiser investment decision should generate profits in the course of owning it.
- Capital gains tax
When profit is realized from the sales of gold, the profit attracts capital gains tax. The capital gains tax can take as much as 28% off the realized profit.
A decision to invest in gold can yield a good outcome, and could be bad as well. Therefore, the choice boils down to return maximization, which is the goal of every investor. To attain this goal, it is advisable to avoid limiting your investment to gold only. I
t is safer to diversify your investment portfolio. The diversification of the investment portfolio is beneficial in 2019 and even beyond. This is because it gives room for investment in gold and other forms of financial assets. Consequently, it increases the chance of reaching the goal of maximization of returns on investment.