So you’re ready to diversify your portfolio with gold investment. The question on your mind now would be if you should invest in physical gold, or are the other types of gold investments available are just as good, if not better, than investing in the real thing? Let’s find out.
Physical Gold versus other Gold Investments – Physical vs “Paper”
So there’s physical gold; bullion bars, coins, jewelry…basically anything you can hold and touch. And then there’s everything else. From gold mining stocks to ETFs, these forms of investment are often touted as being much safer and easy to get into immediately.
Continuing on the subject of physical gold versus other gold investments, which would be better in the long run? Let’s take a look at some alternative gold investment options.
Physical Gold versus other Gold Investments – “Paper Gold” and Mining Stocks
Let’s start with “Paper Gold”. The term usually refers to assets that reflect on the price of gold only and not the physical commodity itself. Hence the term “paper gold” – it’s considered to only be paper because it’s not backed by any real, physical gold.
The concept was intended to offer investors the benefits of investing in gold, without the hassles of buying, storing, selling and insuring any physical product. While that’s all well and good, bare in mind that paper gold assets like ETF are simply virtual representations – the value assigned to the asset is still determined by the pricing of the actual physical gold. Meaning, without the real thing, “paper gold” has no intrinsic value of its own to speak of.
Then there are mining stocks. As the name suggests, investing in mining stocks involve purchasing a share in a gold mining company. While the share prices will theoretically leverage the price of gold, it’s subjected to its own set of downsides. In essence, you’re essentially investing in a company – the share prices will be determined by performance of the company’s management, as well as costs related to the environmental and economic risks it will take on.
Physical Gold versus other Gold Investments – Keeping it real for the long run
As with any form of investment, you would want an investment that would be able to pay off in the long run, and keep your future as secured as it can be. That being the case, there is really no other alternative to owning actual physical gold.
For starters, on the topic of physical gold versus other gold investments, physical gold (be it in bullion, coins, etc) actually possesses its own intrinsic value due to its rarity and finite supply. It’s also tactile – there’s nothing quite like being able to touch and feel whatever you’re actually investing in with your own bare hands.
Then there’s the simplicity of owning and trading physical gold. When comparing physical gold versus other gold investments, the real thing is a much more transparent and straightforward process, especially in terms of the costs.
For starters, its much easier to buy and sell physical gold products anywhere in the world, as it is still considered as a universal currency, with a historical track record of 5,000+ years of trading. You can buy them in any amount that you’re comfortable with, and being a collectible commodity, it makes it easy for you to pass down your wealth to future generations.
Besides, the main reason anyone would want to invest in gold in the first place is to hedge against risk. This is why physical gold is still preferable – it is not managed by a third party and not subjected to counter party risks. Issues of mismanagement, currency devaluation and banking or financial collapse will not devalue your physical gold. On the contrary, having a stash of physical gold during such occasions will actually be in your favour as gold prices would skyrocket.
So if you’re planning to start investing in gold for a rainy day, just go with the real thing.