There are a number of benefits that come with the investment into gold stocks, but there are a number of hidden costs associated with this investment as well. If you’re thinking about gold, then it is important to consider all of the costs to make sure it is a worthwhile and profitable investment. Here are the top hidden costs that are often not included in an investor’s initial business plan that includes gold stocks.
#1. Higher Tax Rates
The US government taxes gold and all other precious metals, even when they are held in stocks, as a collectible. This means that they are subject to the capital gains tax when they are held for at least a year. In comparison, equities that are held have a lower tax rate that generally falls between 15-20% for investors today. This mean a larger portion of your investment will end up going to the tax collector instead of your bank account.
#2. Storage Costs
There are a number of ownership costs that are associated with gold stocks as well. You can avoid the sales tax by purchasing gold stocks, which is a tremendous advantage on high value transactions, but you’ll still need to pay the custodian for the gold storage that is happening on your behalf. This can be as much as 2% of the total investment that you make. This is less than a safe-deposit box or a new fire safe in your home at first, but eventually the costs keep adding up. Then there’s the insurance that you’ll want to have on your gold as well.
#3. Most Gold Is a Long Term Investment
Gold is a good failsafe investment because it tends to stay rather stable in pricing. This means there won’t be any annual income originating from the investment, but you will be able to have cash when you need it. That’s why gold is a good retirement investment because it will appreciate over time and have more value when it is time to retire. Gold stocks can provide some day trading success when managed properly, but equities and other stocks tend to provide more profits, even though they require an investor to take on more risks.
#4. Gold Isn’t a Guarantee
When gold hit record highs in 1980 at a modern equivalent of $2,400 per ounce in today’s money [$850 per ounce then], it quickly bottomed out. It lost 40% of its value in two months and ultimately fell to $280 per ounce by the year 2000. For those who invested near the record highs, it took them nearly 30 years to be able to recover their investment! That means there is no sure thing when you’re purchasing gold stocks. It’s a good hedge against a loss, but it can also lose its value in a hurry and leave you with empty pockets.
#5. There Are Scams Everywhere
Gold scams are common. Coins can be falsely graded and cheap alloys can fool an amateur investor into thinking that they’ve purchased gold when they really did not. That’s why gold stocks are a good investment, but these scams affect the price of gold. That’s why it is important to understand the entire market before making any investment – otherwise you might lose the money that you’re trying to secure.