Welcome To Transfs.com – A Website Dedicated To Help You transform your financial status – Through Precious Metals
Hi my name Nathan and welcome to Transfs.com. I dedicate my time to finding you the very best information and fact concerning precious metal invesment, whether you want to physically own gold or silver, bullion or coins. You can learn more about me personally and my finance background here.
Wherever you live in the world, precious metal is a commodity that can benefit you and your financial status. If you live in the US, you may feel that due to the current state of personal retirement funds, you need to address that issue personally. So whether you are looking to invest in gold or silver and phically own it, or you live in the US and want to improve your retirement by setting up a gold IRA, hopefully all the information you need in yuor decision making is on this site.
Is Investing in Gold Worth it?
I’m don’t want to give you the impression that gold is the holy grail of financial improvement. Just like stocks and shares, the price of gold goes down as well as up, you can see that for yourself on the chart to the side of this section. But what I do want to do is give you the facts as I have found them, with links to the information, so you can make up your own mind as to whether gold is a worthwhile investment or not.
It is well documented for the fact that it is true, that over the life time of the stockmarket, all the precious metals, including gold, have been outperformed by stocks. Having said that, this did change recently in a dramatic way. Precious metals have outperformed the Dow Jones on a rather impressive scale, since the start of the new millenium in 2000.
Below you will see a chart taken from Yahoo Money (chart available here) that shows there was a 63.16% change from the start of 2000 to the end of 2014. Or to put it another way, when the market opened on 1st January 2000 it opened at 11,700 and when it opened again on the 1st January 2015 it opened at 17851.04. What this means is if you had invested in the stock market at the start of 2000, by the 1st of January 2015 you would have received a return on your investment of 52.6%. I think you would agree that considering the low return we currently get from the banks, a return of 52% is very favorable.
The chart to the side here, courtesy of Kitco.com, shows that gold was at the price of $283 an ounce at the start of the millenium and it opened at the start of 2015 at the price of $1206 an ounce. That is a return of 326% – a big difference from the 52% gained from the stock market over the same period.
So yes, historically stocks ahve outperformed gold, but as the evidence shows, this has changed and the fact that it has happened over a 15 year period, and doesn’t look like changing, investing in gold maybe worth looking at, if you ahven’t already.
So Why Gold?
From thousands of years ago, this metal has always been a big deal. I say it’s a big deal not only due to its worth but also because investing in it has somehow always proved to be the best way to avoid inflation. Individual retirement accounts have been brought down by inflation especially for investors whose main focus was traditionally on the stock market, real estate and private equity. But buying a precious metal for the diversification of your portfolio, to increase your financial status and wealth, or to improve your IRA account, will always prove to be worthwhile. Here’s why.
Why investing in gold is better than most precious metals/paper currencies
While investing in precious metals like silver and platinum can still bring you some good returns, most people prefer gold because it is incorruptible. Silver and platinum will tarnish and react with oxygen respectively depending on the conditions they are subjected to. But gold can always be polished to look brand new. This is because it is a stable metal that doesn’t react with other elements. And in a similar fashion, it is economically stable. Unlike things like paper currencies whose value will fluctuate depending on how well the economy is doing, gold has a history of maintaining its value and can go up even in the verge of difficult economic times. It’s due to this reason that people are buying it as a form of preserving their wealth.
It beats Inflation and deflation
Gold has had a remarkable performance during times of inflation and also deflation. Inflation is basically a period when the economy of a nation is struggling and the cost of living is high. During these times, gold prices tend to increase and that’s why the precious metal is often regarded as a ‘hedge against inflation’. Deflation on the other hand is when the economy is also struggling and business activity is quite slow. During deflation, it has been seen to perform well too. (check out my page on inflation and how it has impacted on us over the years)
‘A crisis commodity’
The reason why it is referred to as a crisis commodity is that, it seems to maintain its value even when the economy is facing a crisis due to political reasons, war or other world tensions. It has been shown that its price goes up when there is political instability and people don’t have a lot of confidence in their governments. In times of uncertainty, a smart investor will not look at the stock market or real estate which is likely to be affected by environmental factors. Therefore gold will retain its value in times of financial insecurity.
Diversify your portfolio
A smart investor will always look for investment opportunities that are not closely related to each other. That’s how you end up with a diversified portfolio. There’s a significant difference between gold and other forms of investments like stock market and real estate. By investing in gold and maintaining other financial instruments, you will have a diversified portfolio and reduce your level of risk when things go wrong economically. Diversification is used to minimize risks and overall volatility in an investment portfolio and that’s why it’s very important. You can have at least 5% of gold in your investment portfolio. Diversification has always proved to be a great way to immerse wealth and that is why gold, being economically stable, can help you to achieve that.(Watch the video in this page of Billionaire Investor Kevin O’Leary explaining why he diversifies his investments with gold.)
It has always been a high demand product in most emerging economies. In so many countries, it is considered as an item used to make the best jewelry and sold at a very hefty price. People will buy jewelry items made from genuine gold at absurd amounts simply because of the kind of value this precious metal gives. In fact, that is the reason why it will always be in high demand. (China increased its gold reserve by 57% between 2009 and July 2015).
Research has even shown that October is when gold is in the highest demand in most countries. This is because the wedding season begins in October in most countries and people invest in expensive jewelry during such occasions. Other than being used to make jewelry, gold bars have also been in high demand because they are regarded as a traditional form of saving. And among investors, the demand is even greater as the years go by. Not so many people own substantial amounts of gold today.
Low production of gold
One of the things that may reduce the value of gold is when the precious metal starts being produced more. But this is not expected to happen anytime soon. The production of gold is very expensive and only a few mining companies can be able to meet the cost. In fact, the economic crackdown has made it even harder for mining companies to invest in structural components that will boost the production of gold. This has made it even more difficult to mint gold. So its physical presence is stable and this minimizes the chances of pulling the price down.
All currencies are based on paper money
There’s no single currency that is safe from the wrath of inflation. Whether you invest in euros, yen or Swiss franc, no world currency can act as a guard against inflation as well as precious metals do. Even countries are investing in more tangible assets in order to protect themselves because the world reserve currency which is the dollar is facing serious inflation. That is why gold is a better alternative to paper money because it maintains its value even when the environment is going through an economic downturn.
It can be a suitable investment if you want to get a more diversified portfolio and it also reduced your risk since prices will increase even when the economy is struggling and paper investments are decreasing in value. Through the years, gold has been considered as a great retirement investment for individuals who are looking for monetary stability. Take your time when you think of expanding your investment portfolio and look for other forms of investment like gold. It could be the one investment that changes your life for good.
Investing in a Gold IRA (USA Only)
IRA stands for ‘Individual Retirement Account’ and when relating to gold, it is when this, or other approved precious metals are stored instead of paper based assets. A gold IRA functions in the same way as a standard one but the main difference is that instead of it holding paper assets, it hold physical gold bullion in the form of coins or bars. (for more information on Gold IRA check out Wikipedia) (for information on IRA’s including how they work exactly, how many you can have and the fees involved, check out my dedicated section on IRA’s)
Everyone wants to ensure that they have sufficient funds for their retirement. Having worked hard all your life, you want to have a retirement that you can enjoy, that gives you the freedom to do what you want. Whether that is to travel, or spend more time with your family, buy a retirement home the other side of the country, or to relax doing the thing you enjoy the most in life, you will want to make certain your IRA provides you with the standard of living you deserve.
Gold price by GoldBroker.com