With all options an investor has at the present, making an investment decision can be overwhelming. From the entire gamut of investments, ranging from stocks, bonds, real estate, US treasury securities to rare metals like gold and silver, an investor must create a portfolio that can effectively help him meet his or her short and long term financial goals.
With gold prices at an all time high right now, many investors are thinking about adding it to their portfolio.
Some of the pros and cons of gold investment have been given further. The decision about to invest in gold is entirely yours . The list of gold price changes given here should help you put things in perspective regarding why gold is being seen as a good investment option at the present moment. It is a listing of gold prices from 2010 to 2018.
- 2010 - 1,125.00
- 2011 - 1,382.75
- 2012 - 1,621.00
- 2013 - 1,663.50
- 2014 - 1,226.75
- 2015 - 1,209.42
- 2016 - 1,087.00
- 2017 - 1,171.95
- 2018 - 1,313.25
Gold prices have gone through ups and downs, reaching its highest value in 2013.
Whether or not buying gold right now is a good investment option is a debatable point. There are many ways to invest in gold, from bars, coins, exchange traded funds, gold accounts, gold certificates and derivatives. Here is an objective analysis of the pros and cons.
One of the advantages of investing in gold is the easy liquidity it provides, compared to other investment options. Gold can be bought and sold through banks and jewelry outlets any time, acting as a ready liquidation source.
Secondly, although gold prices have fallen in the past, the rarity of the metal and limited supply ensures that it will never suffer from total devaluation, though it may go through ups and downs. In times of recession, gold is invested in heavily, which invariably leads to a rise in valuation.
This makes it one of the best investment options to hedge against inflation, though better options like 'TIPS (Treasury Inflation-Protected Securities)' exist now. Thirdly, you can benefit from the price rise in gold that is expected to continue in the near future.
One of the minus points of gold investing is the fact that it's a speculative investment and predicting its future value is difficult. The price is entirely dependent on market demand and supply, as well as investor expectations all over the world.
As an investment, gold cannot provide you with any returns in the form of dividends, which securities like stocks may provide. Also, storing gold involves additional costs, which the investor must bear. However, options like gold certificates and exchange traded funds exist that do not require you to physically store the gold.
The most basic disadvantage of investing in gold lies in the fact that it freezes your investment and cannot provide periodic returns, besides being subject to a high degree of speculation.
Gold is certainly a good investment to have as a small part of your portfolio right now. Since its value has been continuously rising for many months now, you can invest a small percentage of your savings in it, hold till the price appreciates substantially and then sell it for a considerable profit, before it starts falling in value, as it inevitably will.
However, this course of action is only if you are ready to take the inherent risk of price fall. If you are a defensive investor, a period of rising prices is certainly not the best time to buy. All that said and done, this is my personal opinion and you should base your decision entirely on your own analysis and the degree of risk you are willing to take.