Informed Choice chartered financial planner Martin Bamford was quoted in The Telegraph today, in an article looking at the merits of gold as a hedge against inflation.
Commenting on the merits of adding gold to an investment portfolio due to the current elevated levels of price inflation, Martin said:
“Investors are understandably concerned about inflation at present. But there is a real risk that those now buying gold are doing so at the top of the market and will end up making losses when prices fall.”
He added that investors should remember that gold does not produce any income, in terms of either interest or dividends, so returns are based solely on capital growth. He said: “It can also be difficult to access as an asset class: many people end up buying funds that are largely invested in mining stocks, which don’t always reflect gold prices accurately.”
Commenting on the news that Standard Life now offer their SIPP investors the ability to buy gold bullion within their pension portfolios, Martin said:
“I’m all for choice, and such innovation helps investors diversify. But I’d be wary about getting into gold at present. The price may still rise further, but the gains are unlikely to be so significant. When prices fall, it is those who got in near the end who will suffer the biggest losses.”
He added that there were also investment costs to consider, such as the cost of storing, trading and insuring bullion, or dealing charges on ETFs. “A diversified investment portfolio, containing shares, property and bonds, may be a better way to protect against inflation.
You can read the article in full here.
Photo credit: Flickr/oliworx
