One disadvantage of investing in gold is the cost. Gold is a physical asset, which means you must have a way to store it securely. Another risk of investing in gold is liquidity. However, you should be aware of the possible risks involved in this type of investment.
First, it takes considerable capital to be able to buy gold. Another challenge is finding the best and secure storage for your assets. Finally, its speculative nature of value may be precarious for conservative investors. We have said that the price of gold works incredibly well even in times of uncertainty.
Therefore, a good approach to balancing volatility and return on your investments is to make gold part of the list. After peaking in 1980, the price of gold has fallen by 65% in less than two and a half years. You can see the volatility of this supposedly safe and stable asset class. One problem with investing in gold is that you have to store your gold somewhere.
Now that you know all the advantages and disadvantages of investing in gold, it's up to you to decide whether you still want to buy gold or, rather, invest in the stock market or real estate. Like any other investment, gold is affected by the political situation in the world at any given time. There are particular areas in the world where gold mining is especially lucrative, and any political conflict in those regions can temporarily affect the price of gold. In addition, concerns about whether a central bank or a national government can sell a large part of its gold supply may cause fears that the price of gold is about to fall.
Similarly, investors and speculative traders can use gold futures to participate in markets without owning the metal and to convey investors' excitement about the price of gold in the future. However, gold is likely to retain its value, and it is difficult to imagine a scenario in which gold investors are wiped out. Investors also earn interest rates on gold bonds, giving them a higher return than owning physical gold. Another advantage of investing in gold is that gold not only looks good, it is also used in many industrial processes.
While I wouldn't recommend this if you don't know what you're doing, you can earn higher returns compared to just investing in physical gold, and those additional instruments give you plenty of room to play with gold investments. Investments in gold are something that everyone understands and you can't make so many mistakes in this regard, since gold is traded in a perfect market and there are no big information asymmetries, as in the real estate market, where you can make big mistakes, but also very good bargains if you know more than a property seller. If you are investing in gold to protect your portfolio against volatility and inflation, the exposure to the price of gold itself will be more reliable. However, everything is not yet positive and we should talk about all the problems of investing in gold in the next chapter so that you can better decide if you want to continue investing in gold or if you want to invest your money in a different asset class.
If you don't invest in physical gold bars but in gold watches, you also have to fear that they will rob you in public and that sooner or later you will lose your treasures in this way. These funds will not provide you with physical gold as an investment, but will provide you with certificates that recognize the amount or share of gold you hold through the fund. Indians love to invest in gold on any occasion possible, but many of them don't understand why gold isn't the only ideal investment. Every investment involves risks, but gold has not given any valid reason to invest in gold.