invest in gold, not the stock market

Why I Don't Invest in Gold
Gold isn't anything special. It's possible to earn greater returns with an economical S&P 500 fund than a few gold coins.

The investment in gold will cost the storage costs in addition to capital gains taxes, and a performance lag in the portfolio. Plus, it's an ineffective hedge against rising inflation.

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1. It's a store of value
It is frequently viewed as a hedge against inflation and uncertainty and uncertainty, making it a valuable investment option for portfolios. However, precious metals should be viewed as an asset class that offers diversification and stability rather than a method to increase wealth.

There are many options to invest in gold, which includes physical bullion, coin and jewellery, as well with exchange-traded funds (ETFs) and stocks of companies who mine or refine the precious metal. In the majority of cases, investing in physical gold is a major initial investment, and doesn't offer any income or yield, which can be impractical for those with limited funds or those who would prefer investing in assets that provide an income stream that is passive.

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Moreover, trying to time the gold market can be dangerous because prices for the precious metal can fluctuate in short intervals of time, and they do not tend to outpace other investments in long-term price growth. As such, it's important for investors to consider the long-term perspective of their investment in deciding whether to add precious metals into their portfolios.

Although it's true that gold has historically retained its power of purchasing during times of inflation, it's also crucial to keep in mind that the commodity does not provide any income or returns that makes it less attractive to those who seek stable sources of cash flow and growth over time.

2. It's a product
Gold has long been seen as a secure investment and people tend to invest in it in times that are characterized by economic instability. But is it really a good store of value? This week on Commodity Culture, we'll dig deep into the mysteries, appeal and meaning behind the shimmering metal called the Incas described as "the tears of the sun."

One of the main reasons the majority of people buy gold is to hedge against inflation. The theory is that if currencies become shaky or whole economic systems collapse, gold can be viewed as an alternative that is stable. But, there are a lot of problems with this argument.

It is important to keep in mind the fact that gold's a commodity which means that its price is subject to fluctuations based upon demand and supply. It is therefore impossible to know its long-term price. Additionally, storing gold is costly. It should be kept at a secure place, and isn't always simple to sell. In addition, unlike shares or bonds, gold is a valuable asset that does not contribute to any economic development.

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Finally, the fact is that gold has a poor performance as an inflation-proof hedge. For the past 30 years, stocks have outperformed gold on every standardized return indicator, even inflation. Therefore, unless you're trading or an investor, there's really no need to use gold as an inflation hedge. Instead, look for alternative options to physical gold by purchasing a gold-backed fund, which will eliminate many of the disadvantages of buying bullion.

3. It's an insurance policy against rising prices.
As a currency for investors, gold is a reliable store of wealth and inflation hedge. During the Gold Standard period in the beginning of the 19th and 20th centuries, major currency were tied to gold and supported by it. And while fiat money is long gone from the gold standard, in the course of the years, an ounce gold has consistently kept up with inflation.

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This is why many investors hold a slice or two of gold for this reason. With inflation reaching its highest level in 40 years, protecting against declining purchasing power is top priority for many.

That's the reason you'll find numerous late-night informational ads promoting the advantages of buying a bag of gold coins. However, these ads are founded on a fear factor and not based on facts. In fact, stocks have defeated gold in every standard returns, adjusted for inflation in the last three decades. This includes the last few years, when inflation reached the highest levels in four decades.

Smart investors could instead opt to use Treasury TIPS as a way to guard against inflation. TIPS pay greater rate of interest when inflation increases in the future, and have had better results as compared to gold in the last 30 years, according to data from MacroBond. Investors need to consider all of their options and choose the asset class which is most suitable for their individual risk tolerance, the time frame for investing and any other objectives.

4. It's a speculative investment
Gold is one of the most sought-after investments for investors due to the fact that it's been viewed historically as a security asset during periods of uncertainty in the economy. It is true that investing in gold isn't always the right move for everyone. Gold can be a useful as a diversifier in a portfolio however, it's not the best choice for investment if you're looking to maximize your returns.

Gold bulls like to point at the fact that the metal has always outperformed inflation. They tend to be selective with their analysis, picking a small portion of time where that may be the case. However, over the long run it's not been the case that gold has always outperformed bonds and stocks and bonds, even when they're in a risk adjusted context.

In addition, the costs for holding gold may eat into your return. There are costs associated with storing and protect your investments that are not included in the cost of the metal that you purchase through an exchange-traded fund (ETF). If you buy gold direct through a retailer, you'll also have to cover premiums, fees as well as commissions.

Moreover, the gold market is highly volatile and can cause significant loss. Therefore, it's not recommended for those who are new to the market as well as you must know the potential risks associated with this type of speculation-based investment. The investment in physical gold could help you preserve your wealth and help diversify your portfolio however, it's crucial to know the role this investment plays in the overall financial strategy.