In light of the increasing fears of Financial deficit The American and Moody’s warnings about the creditworthiness of the Treasury, a central question shows the investors: Are goods still, foremost of which is gold, is an effective way to embark on inflation?
A detailed report prepared by the financial expert William Baldwin for Forbes magazine, in which he reviews the various options offered to investors who are looking to protect their wealth in the face of economic fluctuations and the decline in the value of the dollar. The report focuses on the performance of commodity boxes, especially those that depend on gold, precious metals or future oil contracts and raw materials, and provides an accurate assessment of returns, risks, fees and taxes.
Gold excels
The report indicated that investing in gold has achieved a strong performance over the past three years, an increase exceeding 79%, which makes it the most successful tool in the category of solid assets. On the other hand, the various commodity boxes, which include goods such as oil, gas, wheat and copper, failed to keep up with InflationDespite previous expectations that they will be an effective way.
One of the reasons for this contrast may be that gold, by nature, is used as a store of value at times of uncertainty, while the performance of the rest of the commodities is subject to production variables, supply, demand, and geopolitical conditions.
Divorce between experts about the feasibility of goods
Experts differed about investing in goods in the long term. Alan Ruth, a prominent financial advisor, completely rejects the idea of investing in future commodity contracts, considering it a zero game, as he says, “The future market of goods has not achieved any net gains historically, before calculating the costs.”
On the other hand, major financial companies such as AQR sees that goods remain an attractive assets category within mixed investment portfolios, especially in times of inflation and uncertainty, provided that they are managed in a disciplined manner and at low costs.
What makes gold different?
The report attributes the superiority of gold to the alteration factor, as it is historically seen as a reliable resources store. Despite its limited use of industry and jewelry, the largest part of the demand for it comes from investors who seek to save the value of their money. Statistics have shown that over the past century gold achieved an annual return of 2.2% above the inflation rate.
In contrast, the price of oil depends on a mixture of storage and productive risks. For example, if we assume that the oil barrel will be sold after 6 months at a higher price, the investor may go to buy it now in the hope of profit, while the product sells it at a lower price to ensure coverage of its operational costs, such as drilling platforms that may cost one billion dollars.
Tax problems and high commissions
The report warns that most of the commodity funds, especially those that are managed through external investment institutions and are known as “exempt funds from the Kay One model”, carry high tax risks if they are not placed inside exempt retirement accounts.
For example, if one of them invested 100 thousand dollars in the Fangard commodity strategy fund 3 years ago, and re -invests the distributions, its balance today would have 91 thousand and only 640 dollars, but it will have to report 14,730 dollars as a taxable income, although its actual profits are negative.
The report also spoke about the high administrative fees, which may reach 0.87% annually in some boxes, such as an Invasco commodity index, which is not a tax deduction.
Is investing in goods a logical option now?
Baldwin admits that goods may be an important part of the diverse investor portfolio, but they should be used with caution and within a comprehensive strategy. It indicates that many boxes do not exceed the indicators of public commodities after calculating the fees, and that the real return in the long run will often not exceed the returns of stocks.
However, there are still moments when goods shine, especially in financial crises, or sudden inflation periods, or when the performance of markets is weak Bonds.
Gold remains and goods are conditional
The report concluded with three basic recommendations:
- Gold can remain a safe haven and a reservation method, especially in the long run.
- Investing in commodity funds should be within retirement accounts, paying attention to hidden fees and taxes.
- Goods are not guaranteed, but it acquires real value in times of financial and political turmoil.