Typically, business owners tend to stash away their money in high interest-bearing accounts, while others may decide to invest it in stocks, shares, bonds, and other assets. However, with inflation and the increasing volatility in the global financial market, these traditional methods of investing company money are quickly becoming unreliable.
To start, the interest rate on deposits made on high yield accounts has been on a downward trajectory given the instability of the global economy. For instance, in response to the Covid-19 pandemic, the Federal Reserve reduced the interest rate to almost zero. This means that the money in your company’s savings accounts may gain very little interest, beating the point of stashing away the money in the first place. And more so, inflation has also been rising. As such, your company’s money is not gaining any interest. Rather, it’s losing its value.
These circumstances have pushed business owners to look for safe havens for investing. One of the safer options is investing in gold. However, before you pour your company’s money into gold, you have to do thorough research and know even basic information like how many grams in an ounce of gold there are.
As such, this article can help you with that. Continue reading below to learn why gold is considered a safer option and how you can invest your company’s money in gold.
One of the main reasons investing in gold is considered a safe option is because it's one of the oldest commodities that has managed to retain its value. Essentially, the value of gold is attached to how hard it's to extract it. The more difficult it's to have something, the more valuable it's considered.
Until the 20th century, gold was used as a tool to facilitate trade. For example, if you had paper currency worth 500 dollars, the money would be backed by gold of the same value. However, the gold was stored safely and was rarely ever retrieved for exchange, therefore, contributing to the upheld value of gold.
Another reason gold is considered a safer option is that every time inflation rises, the value of gold increases. This is because each time the economy faces uncertainty, more investors consider investing in gold. And this surge in gold investment helps increase its demand and hence its value. Therefore, when you invest in gold while other assets are losing value, yours has higher chances of appreciating.
Lastly, it’s always good to diversify your company’s investment portfolio. As the saying goes, you wouldn’t want to put all eggs in one basket. Consider investing in gold if your company has already invested in stocks, shares, government bonds, and other assets.
That said, you can only enjoy the value of investing in gold when you do it in the long term. And should choose to invest in gold for the short term, please note that its volatility is equally high as that of other assets, if not more.
There are a lot of ways to invest in gold. To help you get started, here are the options you have for investing your company money in gold:
This is arguably one of the safest methods of investing in gold. It involves buying stocks in gold mining companies. This method is considered safe because it operates just like any other business with similar factors at play. That means, even when the prices of gold are lower, the company is still committed to remaining profitable. It does this in many ways, such as hedging against a decrease in the gold price.
Besides that, the mining company continuously mines more gold. Therefore, if today's gold value is low and it rises within the year, the company is bound to make profits making its stocks valuable.
However, note that you have to scan the market for the best mining companies. Otherwise, you may end up investing in risky miners, adding to the volatility of your stock investment. You, therefore, want to do your due diligence before investing in mining stocks.
If you're looking to invest in gold for the long term while still enjoying its liquidity, this option may be what you need. Investing in gold ETF or mutual funds means buying paper whose value is backed by either equity of mining companies, physical bullion, or gold futures and options. Therefore, the value of ETF or mutual funds doesn't always match the actual value of physical gold.
ETFs are also readily exchanged for money at the prevailing market price. And more so, the best part is that you can trade them from the comfort of your office. Gold mutual funds, on the other hand, strive to beat the returns of passively managed index funds. Hence, they tend to charge high expense ratios.
Investing in gold bullion means owning physical gold either as coins or bars. Although the feeling of having physical gold can be exciting, this is one of the riskiest ways to invest in gold. For one, gold is tremendously valuable. As such, one of the challenges you'll encounter with owning physical gold is its security. How and where do you store it?
Moreover, gold bullion isn't liquid. For instance, if you invest your company’s money in a bar of gold worth $200,00 and you want to sell 20% of its value, you can't. It isn't possible to cut off 20% of the gold and sell it. You either sell the entire bar of gold or forget selling. You can only enjoy liquidity if you deal in gold coins or smaller bars of gold.
When buying gold bullion, it’s always best to look for and make transactions with reputable gold dealers. Or perhaps, sellers that have relations with government mints. Doing so allows you to ensure that you’re buying real gold. It also ensures you make the most out of your company’s investment.
Gold futures are a way to predict the price of gold. Hence, they can inform your decision to buy or sell. This method is best for investors with experience who can accurately predict the rise or fall of gold prices.
One of the pros of using gold future is, should you predict the value of gold in the right direction, you can make a lot of money from a sale and own valuable gold from a purchase.
Futures are used in the form of contracts. Although they’re volatile, making them not a suitable investment, gold futures are still one of the best ways to invest in large amounts of gold cheaply.
If you have been wondering where to start with investing your company money in gold, the options above are some of the best methods in the market. However, be sure to consult and research before deciding on a gold investment method that works for you and your company. All the best!