Gold – one of the most valued, yet misunderstood metal. It is because investors misunderstand it, this valuable asset class doesn’t get its fair place in investment portfolios. And because there are so many myths attached to the precious metal, it is undervalued to a great extent. Investors hold myths about it like – gold is a risky investment, it’s just a barbaric relic, and that it’s just a commodity investing in which you can’t make as much money as you can from other investments.
Once these myths are busted, and gold gets its true value in investment portfolios, gold will have a much higher share in the market.
Here’s deciphering the 5 biggest myths we have had about investing in gold:
Myth #1: Gold is a bad investment/good investment
Busted: To be honest, gold is neither a good investment, nor a bad investment. Gold is cash; gold is money, money you can use in time of need. It is not good, not bad, but very much a wealth-preserving and portfolio-diversifying asset. Once we understand this simple fact, we’ll also understand how to best make use of this asset.
Myth #2: Owning physical gold is a bad idea
Busted: Owning and having to manage physical gold sounds bad as you have to take care of this thing that is worth a lot of money, right? So, why own it? Well, here’s the answer: holding and storing physical gold sounds really bad, until and unless something worse happens, like a financial collapse, and your gold coins and bars suddenly value more than anything else. Worth a thought?
Myth #3: Gold is just a commodity
Busted: Gold isn’t just a commodity, it’s money. Gold shares some traits with commodities, but it is in reality pure money. We’ll know the value of gold as money if someday the value of our fiat currency falls and that’s when gold prices will shoot up, making gold owners the wealthiest people.
Myth #4: It is a big risk to invest in gold
Busted: Firstly, gold rises when all stocks fall. Do we need a bigger reason to start investing in gold right now? Additionally, most risks that apply to financial assets do not apply to gold bullion. Gold bullion is not exposed to interest rate risk, default risk, liquidity risk, and a lot of others. In a very rare occurrence, it is subject to short-term currency risk, and your gold bullion will still never fall to zero. Further, it is a known fact that precious metals provide high return at a comparatively lower risk.
Myth #5: Gold doesn’t really generate income
Busted: Guess what, it does! Gold is really just a store of value; it sits in the vault and may not generate any interest or dividend like your other financial assets. Nevertheless, it provides the investor with –
- A balance in their portfolio,
- An inflation hedge, and
- The benefit of long-term capital gains
If one observes, in the long-run, the capital appreciation of gold is usually a lot better than interest yields.
Well, now that we have untangled all those confusing questions about gold and gold bullion that come in your mind, when are you adding it to your investment portfolio? Share your views with us in the comments section. Happy investing!