One investment with 649 per cent return
This investment has seen unimaginable returns but paying into it isn’t as simple as you may think - and there’s an obvious downside.
From January 1, 2000 until today, the price of gold has increased by over 649 per cent, capturing the attention of a heap of investors.
But for anyone who hasn’t invested into gold in the past, knowing whether it’s a smart move and how to actually get started can be overwhelming. I want to cover the key things you need to know about investing into gold, so you can figure out if this is the right investment move for you.
https://www.news.com.au/finance/money/courses/cashed-up
Why invest into gold?
The first and most obvious thing that comes to mind is the huge uplift in the value of gold in recent years. This growth can easily capture your attention, but ultimately it’s worth keeping in mind how gold compares with other investments.
The most relevant alternative to compare the returns of gold against is buying shares. It’s worth noting that over the long term shares have also performed strongly, with the S&P500 (the 500 largest stocks on the US stock market) up by 185 per cent over the same time period from January 2000.
Further, there have been other periods where shares have performed much more strongly than gold, for example since 2010 the price of gold has increased by 42 per cent while shares have increased by over 262 per cent over the same period. This suggests that while gold has performed well over the long term, other investments have also made investors a heap of money – sometimes even more money.
Gold bullion bars after being inspected and polished at the ABC Refinery in Sydney. Picture: DAVID GRAY / AFP
Another big advantage of investing into gold is that it tends to move differently to the sharemarket. Specifically, when shares go down through a large market correction or crash, gold tends to increase in value. This means for an investor with both shares and gold in their portfolio, their overall investment return is less ‘volatile’.
What are the risks?
One of the main downsides of buying gold is that it typically doesn’t generate any income, meaning you can have a large investment that is ‘unproductive’. When you buy shares, you own a small slice of a company and are entitled to a small slice of the company’s profits, which are paid out to shareholders in the form of dividends.
With gold, because you ultimately own a piece of metal there is no income on your investment, meaning your only lever for financial upside is when the price increases over time. The implication here is that you don’t actually receive any financial return from a gold investment until you sell.
This means gold is not a good investment for someone that’s looking to build a second passive income from investments, a goal of many investors.
Gold doesn’t provide a second income.
Another risk that comes with investing into gold is ‘volatility’ risk. Volatility is another way of saying ‘ups and downs’ that prices of all investments experience over time as markets move. With gold, there can be much bigger price swings in short time periods compared to other more traditional investments. Sometimes this works in your favour when gold prices are going up, but on the flip side it can work against you when prices are going down, and either way it can be a stressful ride.
Also, if you’re looking to buy gold you ultimately want to own a gold bar (or at least a small slice of one), so you need to think about how you will actually buy your gold and how you will ‘manage’ it.
More: https://www.news.com.au/finance/mon...n/news-story/f7bc3f52dbff38cc3186a954286d91c8
This investment has seen unimaginable returns but paying into it isn’t as simple as you may think - and there’s an obvious downside.
From January 1, 2000 until today, the price of gold has increased by over 649 per cent, capturing the attention of a heap of investors.
But for anyone who hasn’t invested into gold in the past, knowing whether it’s a smart move and how to actually get started can be overwhelming. I want to cover the key things you need to know about investing into gold, so you can figure out if this is the right investment move for you.
https://www.news.com.au/finance/money/courses/cashed-up
Why invest into gold?
The first and most obvious thing that comes to mind is the huge uplift in the value of gold in recent years. This growth can easily capture your attention, but ultimately it’s worth keeping in mind how gold compares with other investments.
The most relevant alternative to compare the returns of gold against is buying shares. It’s worth noting that over the long term shares have also performed strongly, with the S&P500 (the 500 largest stocks on the US stock market) up by 185 per cent over the same time period from January 2000.
Further, there have been other periods where shares have performed much more strongly than gold, for example since 2010 the price of gold has increased by 42 per cent while shares have increased by over 262 per cent over the same period. This suggests that while gold has performed well over the long term, other investments have also made investors a heap of money – sometimes even more money.
Gold bullion bars after being inspected and polished at the ABC Refinery in Sydney. Picture: DAVID GRAY / AFP
Another big advantage of investing into gold is that it tends to move differently to the sharemarket. Specifically, when shares go down through a large market correction or crash, gold tends to increase in value. This means for an investor with both shares and gold in their portfolio, their overall investment return is less ‘volatile’.
What are the risks?
One of the main downsides of buying gold is that it typically doesn’t generate any income, meaning you can have a large investment that is ‘unproductive’. When you buy shares, you own a small slice of a company and are entitled to a small slice of the company’s profits, which are paid out to shareholders in the form of dividends.
With gold, because you ultimately own a piece of metal there is no income on your investment, meaning your only lever for financial upside is when the price increases over time. The implication here is that you don’t actually receive any financial return from a gold investment until you sell.
This means gold is not a good investment for someone that’s looking to build a second passive income from investments, a goal of many investors.
Gold doesn’t provide a second income.
Another risk that comes with investing into gold is ‘volatility’ risk. Volatility is another way of saying ‘ups and downs’ that prices of all investments experience over time as markets move. With gold, there can be much bigger price swings in short time periods compared to other more traditional investments. Sometimes this works in your favour when gold prices are going up, but on the flip side it can work against you when prices are going down, and either way it can be a stressful ride.
Also, if you’re looking to buy gold you ultimately want to own a gold bar (or at least a small slice of one), so you need to think about how you will actually buy your gold and how you will ‘manage’ it.
More: https://www.news.com.au/finance/mon...n/news-story/f7bc3f52dbff38cc3186a954286d91c8