Should you invest in gold or is it a relic from the past?
Of all the investment choices available, few evoke more passionate responses than gold.
Views on gold as an investment are polarisers and tend to be more a matter of philosophy rather than fact. People either love it or hate it.
Gold makes up 10% of all our client portfolios, so we often get asked why.
These are the top two benefits we see if you invest in gold as part of a portfolio:
A diversifier
It is an excellent portfolio risk-reduction tool. During times when assets such as shares are falling, gold often rises, which helps to cushion the impact of sharemarket volatility.
For example, over the first two months of 2016, while the Australian sharemarket fell 6.5%, gold (in Australian dollars) rose 18.5%.
In finance-speak, gold helps to improve the quality of the portfolio returns - you can earn the same return but by taking less risk because gold often moves in the opposite direction to shares.
An insurance policy
As well as being a proven risk-reduction tool, gold acts an insurance policy against your home currency losing value.
For example, the gold price in Russian roubles increased 56% in 2014-15 because the rouble collapsed.
Russian citizens chose to invest in gold benefited from its wealth-preservation qualities.
Many people consider gold an old-fashioned relic of little modern-day value.
We think alternative assets are important for any diversified investment portfolio.
While there's certainly no guarantee that the price will appreciate, gold improves the overall quality of portfolio returns and provides a cushion when other assets fall.
Gold is the insurance policy you hope you don't need to use - but are happy it's there when you do.
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