Beware - all that glitters may not be gold
Gold is now just over £1,000 an ounce, having delivered a return of over 40% for Sterling investors from the 5 year low that it hit in December 2015. So if you’d purchased an ounce of gold in December 2015 at £710 it would now be worth £1,020, a 43% return or £310 profit. This has made gold attractive for all investors, but especially for cautious investors who tend to prefer a tangible asset.
Unfortunately Scott Gallacher, a Chartered Financial Planner with Leicester based IFA Rowley Turton, believes people mistake gold as a safe haven whereas he considers it a high risk speculation rather than low risk investment.
“The idea that gold is low risk is one of the biggest investment myths.
By using gold to pay for your retirement, every day you need to spend a little of that gold to pay your bills. Even if the price rises, your lump of gold is still getting smaller all the time. Whereas by investing in companies, (the stock market) which provide both a dividend and some capital growth, there is no need to sell shares each month to pay your bills. Arguably you can maintain the real value of your wealth with a much lower risk of living too long.”
Scott went on to caution savers and investors not to be swayed by what look to be amazing returns.
“From its peak in September 2011 UK Gold investors would have seen a loss of almost 40% in December 2015, i.e. 4 years later.
Despite strong recovery from this December 2015 low point, UK gold investors would still be showing a 15% loss compared to the September 2011 peak, almost 5 years later. Whereas the average balanced managed investment fund is showing a 44% profit over the same period.”
(Source FE Analytics UT Mixed Investment 40%-85% Shares Retail TR in GB (44.13%) – 01/09/2011 – 28/07/2016)
Rather than gamble on the latest gold rush, Gallacher suggests you’d be much better off to speak to an Independent Financial Adviser (IFA) who can recommend the most appropriate, and most tax efficient, investment or savings approach for your own particular circumstances