The stock market hit historic highs at the start of 2018 but now it’s showing vulnerability to headlines and investor jitters. It’s a sign that investors are losing confidence in equities and that there could be a major downturn on the horizon. As an investor, you don’t need to get caught up in the panic. You can do the smart thing and move your money out of equities and into a safer investment now.
There is no asset safer than gold, but there are so many ways to invest in gold it takes some research before you dive right in. Besides gold bullion, you can also invest in gold ETFs or gold mining stocks. Some laud the convenience of gold ETFs and mining stocks, but when you want to minimize risks, nothing beats gold bullion itself.
#1 Counterparty Risk
Counterparty risk is a major concern with ETFs. Counterparty risk means that you’re trusting another party to make good on an investment. Buying a gold ETF means you depend on another party’s fund structure, management, delivery, oversight, and chain of custody. Exchange traded funds break the trust of their investors more often than you might think. Take the example of ETF iShares Gold Trust (IAU) in 2016. The ETF lost administrative control and failed to register new shares with the SEC and faced steep penalties from regulators and lawsuits from investors. It was no small quantity, either. The fund sold nearly $300 million in unregistered shares. Paper gold always carries counterparty risk, but the main reason investors buy gold is to balance risks they take on equities. There’s no reason to buy an ETF when you can buy gold bullion. Take a look at your options for buying gold bullion from Silver Gold Bull or other gold dealers with low premiums and shipping costs.
#2 Mining Companies Are Mismanaged
Another alternative to buying gold bullion is investing in gold mining stocks. Unlike most other stock options, mining stocks typically track with the price of gold for obvious reasons. But buying a mining stock is not the same as buying gold. You are still buying into a company and that means you believe in its performance. Gold mining companies are notorious for mismanagement and bloated costs. They are particularly bad at overspending on acquisitions when they should focus on the business of gold mining. When you invest in a mismanaged gold mining company, you pay for their mistakes.
#3 Gold Bullion Is a Physical Asset
When you buy a gold coin or a gold bar, it’s a physical, tangible asset that holds intrinsic value. The value of gold has been respected and largely stable throughout most of the history of civilization and it formed the backbone of currencies and monetary policies until very recently. There are no counterparty risks of holding physical assets. Depending on how you store gold, you can take risk out altogether, such as by using insured third-party storage to eliminate the risk of theft. Many gold dealers like Silver Gold Bull offer this kind of storage as an alternative to banks due to bail-in concerns (in which case gold would be considered a deposit), especially in Canada. When you’re searching for an insurance-policy asset, minimizing risk should be one of your chief goals. Gold bullion meets all the benchmarks of a safe haven asset.
