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In this video, I'm talking about the disadvantages of investing in gold
I believe that gold is a great investment choice, but there are some critical cons, disadvantages of investing in gold.
Ok, the first, and probably, the most obvious and known disadvantage of gold as an investment is this:
Gold does not generate any income. Yes, I know, we don’t invest in gold to make some extra cash, or to make 5 or 10 percent annually on a regular basis. We buy gold because it is insurance, a hedge. It’s not yet another fiat currency, it is a real currency.
Consider the following possible story.
In 1931 your grandfather purchased a 1-kilogram gold bar and buried it under the earth where, he thought, it would be protected. He was happy because he protected his wealth. And he was right, he did. Two years later, he ignored The Executive Order 6102 (The Great Gold Robbery of 1933, in other words. If you are my subscriber, you know what I’m talking about), he was so happy to see the gold price going to the moon. But he died twenty years later.
Your father inherited the secret map, found the place, dug out of the ground that box with a gold bar inside, and put it in a safe deposit box at a local bank. He was happy as well because it really was a smart investment decision.
One day you will inherit this gold bar which is worth over $40,000 today, and at some point, in the future, you will pass down this legacy to your son.
This is a smart wealth transfer strategy.
But none of you neither earned nor will ever earn a dime from this piece of gold because there is no way to make it produce at least one tiny gold coin once a year.
Yes, the reality is, in this vicious materialistic world, unlike other assets (stocks, bonds, real estate), gold does not provide any income in the form of interest payments or dividends. But… and this is the disadvantage number 2:
The price of gold might rise
The price of gold might rise? How is that a bad thing? Isn’t it an advantage of gold?
Well, let me explain what I mean. This is the gold price chart. If you already invest in gold, or if you’ve ever thought of diversifying your investment portfolio by including gold, you’ve come across it in your research many times, I believe.
The price of gold rise over long periods of time, as we see. Imagine that you had purchased X amount of gold is 1980 or 1981, or 1982 or 1983.
It would have taken around three decades to make some profit from this investment.
Yes, I always say “I am a long-term investor, I am a long-term thinker”, but 30, 40, 50 years... It’s too much. Although, today “plan the next 100 years of your life” challenge is gaining momentum. And, in my opinion, it’s really interesting.
So, the second disadvantage of investing in gold is that its price might rise. It doesn’t necessarily rise, it might rise, and it might fall. Over short periods of time gold is not a hedge against inflation. You can invest $10,000 in gold today, and turn it into $9,000 in 5 next years.
Disadvantage number 3
Gold, as we already know, does not provide any current income, but what’s even worse, in most cases, storing gold is not free.
Of course, even though it can feel like a scary choice, nobody can stop you from purchasing gold bars and gold coins and storing them at home, in a bookcase, under the mattress. It’s free. There is nothing wrong with that, but if you are seriously interested in protecting your wealth, you should buy at least a home safe.
If you didn’t lose trust in banks and prefer to keep your gold in a bank safe deposit box, you know that it’s not free as well.
Another option. If you invest a lot of money in precious metals, maybe tens or thousands of hundreds of dollars, maybe, millions, I believe you know that there is the solution to use secured storage outside the banking system. For example, GoldBroker offers ownership and storage in your name. You can purchase gold bars and coins, silver bars and coins and store them outside the banking system in a private vault. How much does it cost? Let’s see. From 1 to 1,5% per year!
So if you invest $100,000 in gold with GoldBroker, you’ll have to pay around $1,000 as a commission. $1,000 per year!
Yes, if the next financial crisis hits, and the banking system crashes, you will have full access to your physical gold, and probably, you will feel like a king, and your kids will feel like princes and princesses, but this is not what we are talking about in this episode. The point of this video is to show you that even though physical gold doesn’t take up a lot of space, owning gold is one thing, storing it is quite another.