Tag Archives: shares

Gold! Glorious Gold!…

Recently, I was privileged to be given a tour of Gold Bullion Australia, located in Miami on the Gold Coast, of all places!  If you’re like me, then you probably think of capital cities, bank vaults and the Perth Mint as the places where it all happens in the precious metals arena.  Who knew I could try something so local?

It was pretty brilliant I must say to be able to get my hot little hands on a 1000g bar of gold and eye off the gorgeous ingots of silver and gold… sadly I didn’t get to hide any in the handbag and do a runner!

But when markets look like they may turn south and people traditionally flee to the perceived safety of gold and precious metals, I’m often asked… “How can I invest in Gold?”  (Apparently, ‘try Tiffany’s is the wrong answer!’)

You might be surprised, that there’s actually up to 4 different ways that you can invest in precious metals!

Exchange Traded Funds (ETF’s)

Precious metal Exchange Traded Funds (ETFs) are the cheapest, easiest and most convenient way to buy and sell gold.   Unlike physical gold however, there are a number of things to be aware of with ETF’s.

Firstly, you can expose yourself to counter-party risk and liquidity may be an issue, meaning you can’t sell out as quickly as you usually could. In short, when you buy an ETF, the metal you buy may not be held by the ETF provider, it’s held by a large global bank.  Just a possibility to be aware of!

Junior Miners

As gold production is primary, there are a selection of mining companies that explore and extract the glittering, precious metal from Mother Earth’s crust.  By investing in these “Junior Miners” you are investing in gold indirectly.  The price of shares in these companies will be affected by the mining stocks as well as many other factors such as the position of the mining company and markets in general.

Futures and options

Futures and options are vehicles known as derivatives which are available to investors via platforms or exchanges.  A futures position can become a physical position in precious metals and they have a delivery mechanism for buyers and sellers.  Options are like an insurance policy on price.  Most use the recommendations of a reputable Stockbroker and/or their Adviser when looking at these style of investments.

Buying Physical Gold

There are many seasoned investors who have been long term loyal fans of physical gold; the real stuff!  I’m kind of a fan of wearing it myself! (All donations graciously accepted!)  They like to be able to hold a tangible asset with no third-party risk which has been a valuable form of currency for over 5,000 years.  And getting your hot little hands on a 1kg bar is seriously a lot of fun – but may make some of the scenes in the Italian Job look a little less real than previously thought…

To Note ~

Gold does not replace income – that is the role of cash and fixed interest or even real estate – what it does do, is provide a non-correlating alternative to traditionally defensive assets.  Unlike property, cash, stocks and bonds, gold is not sensitive to Macroeconomic factors such as inflation and interest rates – in fact, it usually performs better in a volatile market.

Physical gold can be more expensive than investing in an ETF, although since it is an internationally recognised and trusted form of exchange, the worldwide network of dealers can provide prices 24 hours a day and you can exchange gold for cash practically anywhere in the world.

What are the costs?

Dealers charge a premium on the world spot price of gold; there is a production cost depending on the type of product you purchase and there may also be delivery, storage and insurance costs.

If you can buy from a dealer closer to your location, you will also save on the cost of shipping.  For precious metals, this cost can be significant due to their weight and value.  (Wandering out of the vault with a backpack of gold bars isn’t great for the back!)

When it comes time to sell, the dealer will buy back at spot price less a premium.  The dealer will want to see the physical product, so again it is best if your dealer is close by.  Alternatively, you can store your precious metals with the dealer so you can buy and sell instantly with them.  Buying bullion isn’t risk free, but then, there’s not much in life that truly is.  Researching a reputable trader is imperative.

Have a chat to your financial adviser to see whether physical gold, silver, platinum or other investment options are worth a position in your portfolio.

And for those who want to know a little more, here’s an e-book put together by Gold Bullion Australia for your viewing pleasure called “Why Buy Gold.”

Could you be an Investment Addict?

Does the idea of having to appreciate long-term value in an investment bore you?

Do you just love the idea of instant gratification?

And which is a better guide to good money management?

Do you know how to use a credit card responsibly or have a plan to stay on track with your retirement savings strategy?

Our minds crave short-term wins over sticking to a long term plan everyday.

It’s also why the Bounty bar at the service station looks so much better when we’ve decided we want to lose a few kilos.  The immediate buzz is what we’re after!

When a smart money move pays off and we manage to make a great gain, we get an emotional high that leaves us wanting more.  It’s what neurotransmitters in the brain are wired to do, and why so many of us chase the ‘good feels’ or ‘warm and fuzzies’ we get when things go our way or we have a win.  We all love the fist-pumping action of a win!  And why we can get a little teary over it too.

The danger is when chasing this feel-good emotion trumps our better judgement, possibly tempting us to sell additional shares perhaps, even if it would be better to keep them a while longer or maintain the hold, rather than sell for the buzz we’ll get from netting a quick gain today.

So the next time you’re craving a neurotransmitter high of the investment kind… set up a way that will help you vet the idea first, such as making it a joint decision with your partner or financial adviser first.  Or even simply sleeping on it.

Someone who’s not emotionally involved can bring you back down to earth, give you the reality check you may be needing, and help you model different outcomes, like how much extra money you may be able to earn if you keep your investment in the market another  or two, or five or ten years.  Alternately, selling may be the best idea and you’ll get the green light.

But if it doesn’t work out, and you’re still after that neuro-high, carve out a small portion of your portfolio that you can play with in order to gratify your need to tinker in the market, and feel the rush.  This way you won’t endanger your portfolio as a whole.

Do you keep a part of your funds aside for riskier investment options?

I’m Walking Away

No-one likes to admit that they’ve made a mistake or that a financial decision didn’t quite pan out how we wanted.  And no-one likes to lose… especially financially.

Investors feel comfortable selling a share at a profit, that’s what we invested for, but many hate the idea of unloading shares of a sinking stock. Instead, many cling to the idea that the stock will eventually regain its value, even when all reasonable indicators suggest otherwise.

A lot of us can ride losers too long, hoping for the miraculous turnaround.  And sometimes this makes sense.  If you have no need for the cash and believe in the long term prospects of the company, you may be justified in holding the position for some time.

But most of us don’t like to close out an account on a negative note. It’s not easy to walk away and know we’re going to lose.  We often stay in, thinking that we absolutely must break even at the very least.  But on some occasions, overcoming the fear to sell can be the difference between cutting your losses and losing the lot.

Sometimes, we just have to come to terms with the fact that the share is priced at what it is now and not what it used to be.  We’ve all seen the examples of companies that have left investors hanging with no prospect of being salvaged.

It’s also good to remind yourself that there are still benefits to selling.  Chances are you’ll put a stop to the cash you’re losing, but by realising short-term losses you can also save on tax as it may also help you offset capital gains you’ve made on the sale of your winners.

Aside from shares, this can also apply in the real estate market – especially with our personal homes.  We become emotionally attached and can’t bring ourselves to take anything less than what we’ve decided our place is really worth.

And again, sometimes you’re right.  If you don’t need to sell, there’s no point taking a bath on the sale price.  However, you may also need a reality check.  Chat to your local real estate agents, review the sale prices of other homes in the area.  It may be time to realise other more effective uses for your money.

I’d love to hear about when you’ve chosen to cut your losses and how it panned out for you.