investing in gold

The Benefits and Advantages of Investing in Gold

Gold, the metal with a great amount of social and cultural significance, also it is a safe investment option to consider compared to the tangible and intangible asset classes, many Sri Lankans buy gold not only as an investment but as a saving to be passed on to the generation and as a safe highly liquid method of parking wealth, gold is not a high yielding investment option, but investing in gold protects investors from various market challenges such as currency depreciation and inflation.

Related: Stock Market Investment Tips – Reacting to a market downturn

Let’s discuss few benefits and advantages of investing in gold and understand the importance of having a part of your investment allocated for gold investment.

investing in gold


The advantage of gold investment

01. Highly liquid compared to other asset classes

Irrespective of the amount of gold you hold, you can cash it quicker than any other asset class, the investor has total control over the price of gold and panic selling loses are very marginal compared to stocks, property or vehicle. Also, there are ample options of pawning and gold loan available in the market thus it’s the best alternative to holding cash as you can convert it to cash at any given point.

investing in gold

02. Gold is crisis-proof

Gold is a commodity and the price controlled by the international demand and supply, this unique feature covers the risk of price volatility and loses compared to the other asset classes. Internal political crisis and geopolitical uncertainties will cause a negative impact on real estate investment, share market and forex, however, investors park their funds in gold when there is a crisis situation thus gold stay positive.

03. A hedge against inflation

Some invest in gold as a part of wealth and savings, some invest in gold to hedging financial market risks and hedge against inflation. Gold has shown positive results even during the economic downturn and market volatility, and gold is uncorrelated to share market and investors see it as a perfect hedge against inflation and the best method of balancing the investment portfolio.

Related: Inflation, inflation, inflation – What is Inflation?

Disadvantages of gold investment

Even though the advantages outweigh the disadvantages of investing in gold, you should be aware of the cons as well, thousands of years gold holds the interest of investors, however, gold is a poor yielding investment compared to other asset classes, gold doesn’t bother by anything and it doesn’t do anything big in reality, unlike an investment in the stock market, your investment grows when the company grows and you receive dividends in addition to your investment, gold doesn’t do that. Our recommendation is to have approx. 10-20% of investment in gold considering your risk appetite and financial goals.

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