“What are my returns on my gold savings-investment?”, “is it a low risk or high-risk asset?”

 

So you are deciding whether you should purchase gold as a savings investment; we’re glad you took the time to learn about what returns you can expect.

To give you an answer, it’s important to firstly understand that high returns and high-risks come hand in hand; just as low-risk investments yield low returns.

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Gold is considered a low-risk investment

 

What is a low-risk investment?

An example of a low-risk investment is opening a savings account at a bank. With most basic savings accounts, you earn extremely low returns (usually 0.1% per annum) but you can be assured that your money will always be safe.

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Gold falls into this risk-return category given its nature to hold its value as the cost of goods and services increases every year. What this means is that gold has shown to steadily increase with inflation. 

In the past 5 years (2014-2018), the average rate of inflation was 2.4% (meaning prices increased by about 2.4% every year). When you look at gold’s average price increase in that same timeframe, it has remarkably increased in line with inflation at a average high of 5.3% a year!

 

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Gold is not high-risk

 

Assets such as equities are high risk, offering high returns at a lower guarantee

This means you can expect to earn higher returns in the form of capital gains and/or dividends. But like all high risk assets, there’s a fair chance you might lose some or all of your investment.

 

Gold is not a high risk asset because of its stable performance in the market. Gold’s low volatility and steady increases will more likely offer you less returns compared to higher risk assets, but you can rest easy knowing it’s a much safer option to grow your money.

 

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Does gold yield good returns?

 

All asset classes, other than cash, do not come with guarantees – they all have different risks and expected returns.

 

In a stable economy, gold can provide you with a safe, low-risk asset, as proven throughout history. In times of financial crises and extreme market stress, gold has proven to outperform many other asset classes.

 

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