Self Managed Super Funds: why investing in gold makes sense
Holding physical precious metal is a simple and effective way to diversify your portfolio, which is why we help literally thousands of regular clients invest regularly in gold, platinum and palladium bullion. Is your super nest egg as secure as it should be?
Many of our self managed super clients are concerned that their asset portfolio is not sufficiently diverse. This is especially the case in the aftermath of the Global Financial Crisis (GFC), where it is obvious that many asset classes that were thought to be very secure were, in fact, anything but.
Most financial advisors will recommend that you hold a balanced portfolio of investments, from risky high return stocks, to property and finally low-risk assets such as gold and precious metals.
Buying bullion for your self managed superannation portfolio
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| • | Balance your superannuation portfolio to improve its performance and risk profile |
| • | Store your wealth in an asset that's proven to hold value securely |
| • | Hedge against potential falls in asset prices (stocks, property) |
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Protect yourself from the risks of holding paper money (inflation and devaluation) |
Why holding gold in your Self Managed Super can be a good idea.
Let's take some time to consider just why many advisers are also suggesting that super funds should consider establishing a physical gold (or precious metal) holding of between 2 and 10%. (We are not offering advice here - you should always seek your own specialist financial advice because personal circumstances vary).
In a nutshell, it is all about the security that diversification can provide. And as an option for diversification, it is hard to go past gold for security.
It is important to realise that holding gold is not a magic bullet for your Self Managed Super – after all, there is one thing gold will never be able to give you: cash flow. However, for security and protection of wealth, gold can be a great option.
Remember: gold is not about cash flow – it is about security
and balance in your portfolio
Gold bullion does not give you an ongoing income stream.
It seems an obvious point to make, but it is worth thinking about. But the benefits of holding gold in your Self Managed Super can be boiled down to three important things:
| • | You can be sure your gold bullion will remain precious and valuable for the rest of your life, which means you will be very confident that your wealth will be preserved in your Self Managed Super's gold holdings. |
| • | Gold is a very useful way of diversifying your portfolio to reduce your risk while optimising the long term return from your Self Managed Super Fund. Gold not only has a history of holding value, but also tends to move in the opposite direction to many other investments, providing additional protection and diversification. |
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Depending on the movements in the international gold price, you may experience some capital appreciation if the gold price continues to move upward. (Look to the charts to the right to see what has been happening lately). |
Gold provides wealth protection for your retirement.
Although Self Manager Super investors are always hoping for a steady appreciation of the gold price, the fact is that it is investment protection that is the first and most important reason you should consider when holding physical gold in your self managed super.
Holding a percentage of your saved wealth as physical gold provides an excellent way to balance those riskier, generally cash generating, elements of your investment portfolio.
And you may increase your wealth along the way if gold appreciates.
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When does the gold price move upwards (appreciate)?The capital appreciation of gold is never guaranteed. And you should be VERY wary of any firm that suggests its gold can only appreciate!
However, it is definitely worth noting that one of the other reasons that holding gold in your self managed super is the potential for the price of gold to appreciate. This is especially the case as gold pricing tends to move against the general economic swing. |
In turbulent times, gold can be a safe haven for your
self managed super portfolio.
History has usually seen that gold provides safe haven for wealth in turbulent times. Obviously, we are living in just such a time right now – and economic uncertainty is a simple fact of life.
When general investors around the world grow concerned about the health or true value of other asset classes, they often sell down these classes (such as cash, shares and property) and increase a holding of gold.
This shift tends to increase the pressure for the gold price to rise. To illustrate this, look at the chart to the right to see the effect of investor demand for gold.
Gold ETFs and other forms of "paper" gold: just not the real thing
Often, prospective self managed super clients ask "can't I get the same balanced portfolio by investing in a gold ETF fund?” (ETF stands for Exchange Traded Fund)
The answer is.... to an extent. It is certainly true that paper gold can offer a different risk profile to your other paper assets such as cash and shares.
But – and this is a big "but" – don't forget that when you hold paper gold, you are holding a promise for someone to convert your paper (which represents gold) into cash on demand. Because you are still relying on a promise, you retain some of the very risk you are looking to remove from your portfolio (this is called counterparty risk).
In our view (and yes, we are biased), nothing comes close to holding real, physical gold bullion.
These bars are numbered (in most cases) and are the property of your self managed super portfolio for as long as you choose. When you want to access that wealth, you are accountable to yourself and not relying on any other party coming through on their paper promise (for more information on ETFs, Click Here
A metals account with ABC Bullion: a convenient way for your Self Managed Super fund to hold real, physical gold
A metals account is totally different to holding paper gold (ETFs) with an institution or fund. When you hold a metals account, you gain the convenience of being able to trade (buy and sell) your gold – without having to pick it up from storage.
But make no mistake – when you hold gold in an ABC Bullion metal account, you always have access to your physical gold.
So how can I get started with gold in my self managed super fund?
It is very easy to get started. We do advise you see your financial advisor to make sure you have considered all of your relevant circumstances.
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Once that is done, all you need to do to open a metal account in the name of your self managed super fund is follow these simple steps:
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We report to comply with the needs of your self managed super deed
Most self managed trusts require a metals account and regular reporting of your holding of assets, so ABC Bullion will provide you with a statement after every trade, and twice a year. Currently statements are issued every July and January however from September 2010 statements will be issued monthly. You can also request a statement at any time.
Self Managed Super holders usually always require full replacement insurance of any gold assets, which is standard with gold held on your behalf* and purchased through an ABC Bullion metals account.
The easiest route to successfully including gold in your self managed super portfolio is to choose from one of our popular self managed super packages. Click here to learn about the packages.
*some minimum purchase limits apply for free storage and insurance: 1oz gold, platinum or palladium; 1kg silver.
The information and commentary contained in this website is general in nature. Nothing in this website should be taken as personal investment advice and you should consult a professional advisor before making any investment decisions.
