You’ve invested in the stock market. You have some long-term bonds for security. You may even have a tidy emergency fund to make sure you’re covered when something goes wrong.
The fundamental goal of investing in growth. You would never be able to save as much money from your income alone as you could by investing, and these are tried and true ways of facilitating both high-risk and low-risk growth.
But growth is not the only goal. Once you have the basics in place, it might be time to think about preserving your wealth.
Why Preserve Wealth?
When you invest to preserve wealth, your goal isn’t necessarily to see huge returns. You’re putting your money into an asset whose value has a history of enduring no matter what else is happening to the economy.
Stock markets don’t always respond as you would expect to a recession, but as a rule, recessions hurt the economy, and that hurts companies whose shares trade on the S&P 500, Nasdaq, TSX, and indexes around the world. Persistent high unemployment and low growth will also affect the confidence of investors and lead them to leave.
Real wealth preservation requires an asset that becomes more valuable when confidence in the economy as a whole is low.
Gold Helps You Preserve Wealth
When it comes to assets that can help you accomplish that goal, gold bullion is at the top of the list. Gold is a great vehicle for keeping what you have because it:
- Protects the value of your wealth against inflation;
- Is not correlated to the stock market;
- Is a very liquid asset that you can sell whenever you want to.
Gold Liquidity
Gold is essentially cash but better, and the reason is that you can sell gold very easily. Not sure where to sell you gold in Toronto when you’re ready to cash in? Gold dealers in Toronto pay the closest to spot, which is what you need when you want to make sure your investment has paid off.
Gold bullion, which is very fine 24 karat or .999 fine bullion, should sell for closer to the spot than old or broken jewelry that’s likely to be melted down. Bullion dealers can put fine coins and bars right back on the market while you or your heirs enjoy the appreciation of the asset over the years.
Less liquid assets are more susceptible to market changes. Real estate is a great example. It’s cumbersome to sell real estate. It takes a lot of money and time to sell a house. There will be taxes and fees to pay, and the realtors will take a commission. By comparison, selling gold is a breeze.
Your Money vs Inflation
When your goal is to preserve wealth, gold is a reliable way to beat cumulative inflation. Even in a period of low inflation such as now, the effects of inflation add up year after year.
The cumulative inflation from 1990 to 2020, a period of 30 years, is over 100%, meaning the purchasing power of a dollar halved in roughly three decades. Most adults will spend more than that working.
Gold is one of the most powerful tools you can use to make sure your wealth still carries the same purchasing power when you retire.
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