Investing In Gold: To Buy Or Not To Buy?

Investing In Gold: To Buy Or Not To Buy?

I have always had this idea that gold was the ultimate investing option. For some reason, me and people around me have this idea that if you have money, it is wiser to not keep it as cash but convert it to gold instead.

And, at the moment, as I was looking for more money investing ways, I thought, “Gold!”

But, since I am approaching this in a serious manner and dedicating my time to finding the best investing methods, I decided not to just follow my inherited idea of how brilliant an investment this would make and actually do some research, listen to what some of the experts say, read statistics, and find actual evidence on whether or not it would be as good of an investment as I, and most people I know, think it is.

The short answer to this question is: Gold is not an investment, but yes, you should buy gold. The longer and elaborate answer would be this post.

Why Is Gold Valuable?

Gold is currently the world’s most traded precious metal and its value goes way back to ancient history where it was used for trading in the form of gold coins.

And, nowadays, it goes into many industries; the largest would be jewelry, of course, which takes up about about 50% of the gold demand. Then there’s 40% that goes into direct physical investment in gold, including gold used to create coins, medals, and gold bars. The remaining demand for gold comes from industry, for use in things such as dentistry, heat shields, and tech gadgets. 

And while gold is available in nature, it is quite difficult to extract, which is why it is considered a rare metal and a scarce asset in comparison to its demand.

Extracting gold is a very costly process, it takes many years and a lot of preparations and equipment. And because gold is usually not the only metal available in a gold mine, for example, it is mostly mixed with other metals, so unless the mining companies are certain that this mine will have enough gold supply to cover all the expenses, they wouldn’t go ahead and extract it.

Gold has other values such as the powerful nature of the metal itself that can’t be destroyed by time, water, or fire.

There is a really good article on the value of gold that lists the 5 most overlooked values, if you want to know more reasons as to why gold is such a valuable metal.

Why Should You Buy Gold?

Gold is a lot easier to liquidate than, say, a house or a piece of land. There is always a market for gold.

Something else is that gold has proven to have a strong value as an asset. For example, when the stock market fell all over the world around 2008, gold has skyrocketed in price. But while the stock market prices risen back, gold still kept its value and hasn’t fell all the way back contrary to what was predicted; it just keeps rising.

It appears that gold prices often rise in response to negative economic news or a serious drop in the stock market, unlike oil, for example. So it serves as a safe option to invest your money if you’re looking for a long-term and an almost risk-free way to save your money.

As for the case in Egypt, for instance, there was a huge rise in the price of gold around 2017 following the decision of floating the Egyptian pound as can be seen in the below graph. This has definitely created an insane profit for gold owners at that time.

And before that, between 2011 and 2013, the post-revolution time, which has seriously affected the country’s economy at the time, has also lead to a noticeable rise in gold prices.

 A graph of Gold price per gram in EGP over the years via goldprice.org
A graph showing the gold price per gram in EGP over the years (1996-2019)

Many economic websites and economists around the world have been predicting a possible fall that would take place soon in the stock market which would be similar to the one that took place in 2008; this could mean an obvious rise in commodities such as gold. Whether they are correct in their predictions or not, I think it will certainly be wise to include gold to be a part of your investment portfolio either ways.

I’m obviously no expert, so I have no idea if gold prices are going to be moving up or down from there, but I say just go ahead and buy a little bit of it every now and then, as in gradually add it to your investments. Otherwise, you may need to consult an expert who can make such judgment calls on the best timing to make a purchase based on how they see the market now and in the near future.

You can check this website for Live Gold Price everywhere in the world. At the time of writing this post, one gram of gold costs 747.46 EGP (42.49 USD).

If you want to read a more extensive study on how gold has been performing over the years and why it is a good time to start investing in it, you may need to check out this report on the relevance of gold as a strategy asset in 2019.

How Do You Invest In Gold?

First of all, I need to make one tiny clarification: Despite using the word “investment” in this post, but as far as I can see it, storing your money in a gold bar is not an investment, it is only that, “storage.”

Gold is a way to save your money. But instead of saving it in a bank account, you decide to save it in gold, in hopes that in the case of currency inflation or some global economy crisis your money will not lose its value because it is now gold which has proven over the years that it is a valuable metal and will always be in demand by both individuals and industries.

And while you can certainly benefit from a price difference between the time you buy it and the time you decide to sell it, I’d still not call it a real investment, because first of all, a huge rise in price is not guaranteed and second, normally, if it did happen, this can take a really long time for the prices to differ to the point that you would actually make a decent profit out of it.

Now that we got this out of the way, let’s move on to the how part. There are multiple ways where you can put your money in gold.

1. Jewelry

The most common method and the easiest to find is gold jewelry. They differ in the price and value depending on their weight and purity. However, these may not yield a decent profit because most of the time you will be paying for both the metal plus the work done on the jewelry. So, if you will buy jewelry as an investment option, you may want to check pieces of jewelry that don’t have much work done on them.

2. Bars

The second option is to buy it in the form of gold bars; these would differ in price depending on their weight. Bars of gold are recognized as at least 99.5% pure gold. This is a better option than jewelry because that is much less work down on the gold and therefore you are only paying for the pure metal. But it can also be a little bit harder to sell them.

3. Coins

Another way to own physical gold is to buy gold coins. These can also have other mixed metals to them but they usually have the percentage of gold they contain carved on them. However, like jewelry, you may also be paying for the work done to create the coin shape.

4. ETFs

Investing in a gold exchange-traded fund is buying stock in a company that buys and sells gold. This way you are investing in gold without actually buying and owning it. This one is a good method because it saves you the burden of taking care of physical gold possession, but the downside to it is that it has fees both to put an investment and periodic management fees for your account. So you will need to make sure that you are not paying too much in fees that you are not actually making enough profit.

5. Mining stocks

This is another way to put your money in gold without actually owning any physical gold. Instead of buying gold, you buy stocks in a gold mining company. The prices of the gold mines follow the prices of the gold itself, but you also invest in the actual production of gold by a mining company. The downside to this one is that the mining business is full of risks including possible natural disasters or a mine collapsing. So this option is probably not for everyone.

What Are the Cons to Buying Gold?

Most people who are against buying gold and even those who encourage you to buy it agree that there are some disadvantages to owning it.

1. Saving expenses

If you will be opting for options like gold bars, jewelry, or coins, no one thinks it such a good idea to keep gold simply in your closet or a drawer, so you will probably either need to buy a safe or consider renting a safe in a bank which would offer more security, for example, but is something that will require monthly payments. So, in the short term, it will be adding expenses instead of giving interest.

2. No interest

Gold is considered a non-yielding asset. As mentioned earlier, buying gold is merely just saving your money. So unlike the ability to rent a house you own and making money off it, for example, you will not be getting any interests from the money you put in an asset like gold.

3. Low profits

Unless there is some global economic crisis or a huge financial turbulence like the currency inflation in Egypt that lead to huge rise in prices, gold prices are usually steady. As you can see from the earlier graph, it takes many years to start noticing a significant difference in prices. So, gold in general is not going to make you big profits as an investment.

Conclusion

From what I have read and learned so far, gold should definitely be part of your investments for its undeniable value and as a form of security and to diversify your investment portfolio, but it shouldn’t be your main and only focus, or even a big part of it. Because that is just money put on hold. It is believed that you should invest in gold with only 5%-10% of your money and put the rest of it in other types of investments.

If you don’t own gold…there is no sensible reason other than you don’t know history or you don’t know the economics of it.

Ray Dalio

Till next week, happy days!

A Useful Read

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Passive Income: 5 Online Businesses That Work

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This has been a hard post to put down because there is a crazy number of methods where you can make money online. Not all of them will make someone rich of course, but they do add up. However, I figured I better not overwhelm myself by trying to list every single one of them, but rather choose the ones that would actually have a decent return of money over time. 

I will most likely write another post later on the other little ones that do make money, but not as much as the ones on this list.

So, here we go! A list of the profitable online businesses (in no particular order):

1. Affiliate Marketing

In a nutshell, this is you helping someone else make sales and getting a cut. If there is a particular service or product you have tried and found to be of good benefit, you can sign up for that company’s affiliate program to have a unique referral link, and then start telling your followers/friends about it and every time someone makes a purchase through your link, you get a commission. 

Now I have not tried this thing yet because, well, I am just starting out, but mostly people who do make a lot of money out of this are those who have a huge following on social media websites, on YouTube, or on their own Website. So, if you do have a decent number of followers, you might start making money this way.

The most popular affiliate program is Amazon’s; unfortunately, though, it does not work from where I live; there is only a selection of countries that can sign up to their program. However, I ran into this website called flexoffers.com, it has a similar affiliate program with variety of categories, and you can sign up from anywhere in the world.

If you would like to read some tips on starting out in this, you can check this article that lists some strategies for a “super affiliate marketer;” it is quite helpful.

2. Teaching

While teaching does not sound like a “passive income” kind of method, there are ways to turn it into one. If you are experienced in one specific field, you can create an online course on a website like Teachable.com or similar ones, where you upload videos of you teaching material of a certain course and every time someone signs up to your course, you get paid.

The good thing about this website in particular (because I signed up and checked it out) is that they provide you with resources to help you make a good course; they even offer a free webinar to show you how to create a professional course to make money. But here is a list of all the other similar websites out there. 

I initially thought that to teach, you needed to be some kind of a professor or have a teaching degree, and you ought to be teaching something academic, but, in reality, you can actually teach anything, from languages to crochet or gardening to makeup, anything, literally. You just need to be good at it and also it kind of needs to be something that someone else will have the interest to learn about. Here is a helpful article on how to start, if you want to create your own course.

There is also another option, if you’re anything like me and are not very comfortable in front of a camera, you can then go for an e-book course where people can download your course as a PDF file instead. There are several platforms where you can put your e-book up for sale and they’re mentioned in this article.

If you think of going through the e-book route though, you can go for a course, or just a guide (how-to), or maybe an actual book (which I’m planning to do at some point).

3. Photography

If you love photography you can use that hobby as a means to make money. But there are 2 types of people who love photography.

Those who are like me. (Yea, I keep telling myself I need a better camera..)

Now I’m pretty sure no one will be paying money to use this photo (by me, in case it wasn’t obvious)

And those  who are actually good at it.

Someone would definitely pay money to use this photo (by Mahmoud AbdelGhany)

So, if your love of photography is anything like me, I’m sorry to say, this one is probably not for you. If you’re more of a “I-know-what-I’m-doing” kind of photographer, then please keep reading. 

Aside from the fact that you can take on events that require a photographer, as in weddings and conferences and such, which is more of an “active” thing, but from a “passive” approach, you can certainly make money  by uploading your photos on websites like Shutterstock and whenever someone wants to use one of your photos, you get paid.

There are actually plenty of other websites you can use to sell your photos, this article lists the best of them and it also gives an insight on the types of photography that sell the most.

(Side note: I’m working on polishing my photography skills a bit, so I will be sharing some useful tips later on for those of you who are like me.)

4. Drop Shipping

This one to me seems to be the most complicated one on the list because it requires more planning and a lot of work done before it can become “passive”. It actually took me a while to get everything about it.

Drop shipping is you selling certain products online that you don’t really own or have. You set up a shop for people to navigate and select their desired product. You contact the supplier who actually has the products, usually a wholesaler or manufacturer, pay them for the products that the customer selected on your shop, and then they ship the product to the customer.

The difference between this and a traditional shop is that with drop shipping, you don’t have to purchase a product until you already made the sale and have been paid by the customer. So, that is less chances of losing money.

The trick with this method is deciding on the niche or the market. Because drop shipping is a widely famous business among entrepreneurs and so some markets have a lot of competition. A high competition means that you won’t have the luxury to set high prices for your products and therefore the profit margin you make may be very small in the beginning which will require more effort on your part to reach more customers. Here is an article on how to choose the products to dropship.

The other trick is choosing the right suppliers to deal with. Because they will be the ones shipping the products to your customers, so they need to be reliable and have a good reputation. The better and more professional the supplier, the stronger the business will become since this will build trust between you and the customers who try your shop and whether or not they will want to buy again or tell others about it.

There is a very informative article with some useful tips on the steps required to build this business here.

If you want a longer, more extensive read to go even deeper in understanding this business, Shopify has a free eleven-chapter guide that walks you through the whole thing. Shopify is also one of the most popular platforms where you can build this shop.

5. Online Shop

Now this is also selling products online, but with a more traditional, less tricky approach. And this one can refer to two types of an online shop: one where you actually create and ship physical products yourself and another where you use a website that takes care of the product and the shipping and everything else and you just provide the designs to print on the products. The latter is the online business method on this list that I actually tried so far and which I will discuss in my next post.

As for the former type where you would sell your own physical products, I have read this step-by-step article earlier by Nat Eliason who built his online tea shop in exactly 3 weeks. You might find it helpful as an insight on how to start one yourself. Though I’m not sure if this actually fits in the “passive income” category.

Anyway, this wraps up the list of passive income businesses you can do online. At least, this is the list of things I know can work so far. And as mentioned earlier, I will share my experience with the online shops using print-on-demand websites in my next post.

Till then, happy days!

Passive Income: 4 Real Estate Investing Options

First, what is passive income?

Passive income is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it.
Some of them, however, would require quite the effort in the beginning, just to give it the required push to start off, and then it starts giving you that regular income later on.

What Are Some Passive Income Sources?

After lots of research and comparisons, I was able to come up with the below list. I would say most of them are safe methods, ones that has the least amount of risk and don’t really require a crazy amount of money to start. This is not everything out there, but those are the ones I found so far which seemed possible to start with. I will be adding more along the way.

Here are the risk-free ones (in no particular order):

  • Real estate investments
  • Google AdSense/Affiliates
  • Online business
  • Retirement accounts

And then there are the methods which can be a little bit risky, but not so much if you know what you’re doing:

  • Real estate investments
  • Stock market
  • Index funds

Ho Do You Choose The One To Start With?

When it comes to making a choice, you would mostly just need to check which of these options you can afford or which of them you have the access to try and invest in. Also, if you already have some sort of knowledge or know someone who can help you get started.

For me, I decided to start with the real estate investment option. And I have listed the real estate option in both the safe category and the not-so-safe one, this is because investing in real estate has multiple methods, some of which can be risky and costly, but others not so much. I will briefly explain the details of each one below.

The 4 Real Estate Investing Options

1. Buying Property

This is the typical type of real estate investment where you would need to have a sum of money that is enough to buy a property (residential, industrial, or commercial) and you would then decide to either rent it and have a fixed monthly income or renovate and sell it with a higher price.
You can check out this video on how to buy at a lower cost so you can make a profit in reselling.

Usually the trick in this one is that it could take a long time to find a buyer for a property; and if you rent, you may end up with tenants who do not pay. So, it’s got a bit of risk to it if you’re not experienced in that field I guess.

2. Real Estate Funds

And there are three types of funds: there is the Exchange Traded Funds (ETF), the Real Estate Mutual Funds, and the Real Estate Investment Trusts (REITs).

ETF and Mutual Funds are somewhat similar in many aspects. However, deciding on which fund to invest in would typically rely on the cost vs the profit you will get, and also the flexibility of the trading and how long you plan to hold your shares. If you’re interested in the topic, you can find a more in-depth comparison between the two here

A REIT, however, is a company that owns, develops, and manages real estate properties that produce income. The benefits of investing in REITs include their lower investment entry costs;  and that they are highly flexible, allowing investors to invest in a range of real estate from commercial properties to shopping malls. Check out this article for a comparison between REITs and Mutual Funds including their pros and cons.

Interestingly, I found out that real estate funds were only introduced last year in Egypt (where I live) and apparently there are only two launched at the moment one of them is Naeem Holding fund which provides an annual profit of 26%; and they accept both local and foreign investors with minimum share price of LE 50K. And it looks like there will be more launching soon too. (I am so excited!) More on this here.

3. Online Real Estate Investment

I came across this gem of an option, but sadly I couldn’t find one that accepts funds from where I live (and I will be saying this sentence frequently along the way).

Basically these are online websites where you can buy shares with whatever amount you want, starting with as little as $100 for some websites, and they search for properties to buy and sell and you get an annual profit.

For example, I found this website called Fundrise where you can start investing with $500 and it is not required to be a professional like other websites. This one is limited to investments from U.S. residents only, though. I couldn’t try it, but I have read a lot about it and they were mostly good reviews. There are plenty of other similar websites listed here.

4. Home Construction Companies

This would be investing in a company that builds houses. You can find homebuilder companies in your city or online. And this is the real estate investment option I started with. 

I myself am not a realtor and I cannot afford something like buying a property to rent or renovate and sell, for example. (And I only found out about the Egyptian real estate funds when I was writing this post, so it was a bit too late..)

However, luckily, I found another way to get involved in real estate investments which is through a local construction company where I can buy shares and they use the money I pay along with many other investors to build properties and then sell them; and the investors get a fixed amount of yearly profit.

It was easy for me to choose this one also because I already knew a realtor in that company. I started with the least amount of money to buy only one share for LE 50K (that is about $2800) which is all the money I had on me, literally. And I could have waited until I had some extra money, but I thought the earlier I start, the earlier I will be getting a revenue, and so I just did it.

It is hassle-free and almost risk-free, so it is a good start for me to have some kind of investment to generate a passive income. My plan is that throughout this coming year, I would try and save up money so by the next year I would be able to buy a second share.

(Side note: I would not recommend spending all you have on a single investment option unless you are certain that it is a safe and trusted investment. I did that because 1. I know the people involved and know people who are long-term investors with them, and 2. I knew if I’d kept that money it would have been spent on meaningless stuff especially since it’s SALES season!)

The best time to plant a tree was 20 years ago. The second best time to plant a tree is today.

Chinese Proverb

One of the other passive income options mentioned in the lists above which I also find interesting is the index funds. Index funding is a type of mutual fund with a portfolio constructed to match or track the components of a market index. It is said to provide broad market exposure, low operating expenses, and low portfolio turnover.

I’m planning on trying this as a next step. I’m currently still searching for the best index fund to invest in in Egypt. But the good thing is there are options to invest in international index funds even if you are not a resident of the country. Although, it seems to have a more complicated procedure, but it is possible. So, I will be doing more research on the matter and will be sharing my findings in a later post.

The other passive income option which I found possible and somewhat easy to start is the online business. Online business however is an umbrella term for a huge number of businesses that you can try. In my next post,  I will be sharing all the online businesses that most people sort of have agreed to have been the most helpful and which ones I myself have tried so far.

Till then, happy days!