How to invest in gold: options for investors

As we all know, gold is a precious metal that is mined by panning rock ores. Mining gold is a very labor-intensive process, and its deposits are rare throughout the world, which allows this metal to be classified as rare. Buying gold is a fairly stable investment option that allows you to protect your money from inflation and devaluation.

Investing in gold can bring the client both solid income and significant losses. To invest in gold, your brokerage account can purchase securities from mutual funds (mutual funds) or ETFs (exchange traded fund) that invest in gold. We will look at all the nuances, pros and cons of this investment in more detail below.

Method 1: Captain's - buy an ingot

The most obvious way is to simply go to the bank and buy a gold bar. The rate for bullion gold is set by each bank individually per 1 gram. Basically, the purchase price correlates with the world price, but you will have to pay a spread, which in different banks ranges from 1% to 5%.

Then you just have to wait until the price of the bullion rises enough to win back the spread and bring profit to its owner. Gold is a volatile instrument, its value both rises and falls; it is impossible to predict price jumps and say how long it will take for an investment to pay off. Unless you're Nostradamus.

Gold is sold in bars of various weights. There is even 1 gram. You need to pay attention to the fineness - the higher it is, the more expensive the gold. Almost pure gold is 999 fine. The bars are sold in sealed containers and are accompanied by a certificate. You cannot damage the container or lose the certificate - the price of such an ingot immediately drops by 20-30%.

Gold is a very soft metal. Therefore, in ancient times, gold coins were bitten into pieces - if there were traces of fang teeth left on the product, then it was genuine. Therefore, you need to store gold with special care: the slightest scratch or dent – the price drops.

Therefore, gold bullion is usually stored in safes. Most often - banking. Large overhead costs are a significant disadvantage of such an investment.

The second disadvantage is taxes. A private investor will have to pay VAT of 22% on the profit received. Discussions about exchanging or reducing this tax have been going on for a long time, but things have not moved beyond discussions.

Therefore, if you are not a jeweler, not a Central Bank or a nobleman who plans to flee abroad with family jewelry, then choose other ways to invest in gold.

By the way, since it’s a captain’s method, I’ll put a demotivator here, also from the captain’s series.

And here’s another interesting article: Gazprom dividends in 2021: record profits and record payments

Physical gold

In Russia, you won’t be able to go directly to a factory or a gold mining company and try to buy precious metals (at least legally).

You will have to apply through intermediaries such as banks and exchanges.

So what is available to a private investor in the form of purchasing physical gold?

jewelry;
gold bars;
collectible and investment coins.

Jewelry and ornaments

Rings, earrings, bracelets, pendants and much more. Sold on every corner in jewelry stores, pawn shops, and online resources.

It’s beautiful, doesn’t take up much space, and is always at hand. “Double benefit” - both as a toilet item and as an investment item.

But we will look from the side of a practical investor.

The price includes VAT. If you sell it back, no one will return it to you.
You are not buying pure metal, but an alloy with a low purity. Usually 585 sample. This means that the jewelry contains a little more than half of gold.
The price of an artistic product is much higher than the cost of bare metal. And it is very difficult for a non-specialist to determine the true (fair) price. Surely you yourself have noticed that in different stores the same (or at least very similar) products are sold at completely different prices. There's a good chance you'll overpay. And give money not so much for the metal itself, but for a beautiful picture.
Risk of running into a fake. You think that buying a product from a jewelry store is a guarantee of authenticity. Is not a fact. According to statistics, the share of counterfeits usually ranges from 10-15 to 25-30% of turnover in the jewelry market. From non-compliance with the specified sample, to outright fake in the form of gilding.

And the main disadvantage is low liquidity. In simple words, where and most importantly for how much can you sell jewelry? At the pawn shop for half the price. Or at the price of scrap. Again with a good discount.

In order to earn something or at least stay with one’s own, it is necessary for world gold prices to increase at least 2-3 times.

RESULT . Unless you are a professional collector, buying jewelry as an investment is not advisable.

Precious metal bars

Where can I buy? Usually large and medium-sized banks.

Here we have not some kind of mixture, but a metal of the highest 999 standard. Bars are available in different sizes and weights, from grams to kilograms.

Investment Features:

You will have to pay VAT upon purchase.
Costs or risks of storage. The ingot can be stolen. Or you'll have to spend money on a safe. Although this does not guarantee 100% safety.
Linking to a specific bank. In most cases, you can sell the bullion only to the selling bank. Typically, banks are extremely reluctant to buy “other people’s” bullion. You may end up incurring costs for an authenticity examination, or purchasing foreign metal at slightly discounted prices compared to the bank’s own gold.
Moreover, banks are not even willing to buy back their own gold. Or rather, rarely does anyone buy back bullion. Often only selling to customers.

What conclusions can be drawn?

When buying a bullion, we immediately lose 18% in value in the form of VAT. Therefore, this type of investment is definitely not suitable for speculative purposes.

Damn, I forgot about such a thing as a spread. (No, this is not a butter substitute).

Spread is the difference between buying and selling. We conditionally bought an ingot from the bank for 50 thousand rubles (dollars, euros), and the bank buys it back for 45 thousand. The difference of 5 thousand will be our spread.

It's like exchanging currency. There are always 2 courses: buying and selling. About 3-5%. This is how banks make money.

What is the spread on gold bars? - you think. Five? Ten? Maybe fifteen?

Almost got it right. From 25 to 40%. The smaller the bar, the higher the spread. And vice versa, they give a discount for large wholesale orders. They will increase not 40%, but “only” 25-30%.)))

For example, the cost of gold bars when buying and selling in one of the largest banks.

This is certainly not the best offer; you can find more reasonable prices. But the difference will still be tens of percent.

Bottom line. Buying bullion is suitable for investing large amounts (spread reduction) and with a VERY long investment horizon.

Golden coins

If you were planning to invest in gold coins, then I will probably greatly disappoint you.

Those who are simply interested in investing in gold coins usually come across articles of this kind:

“In 20...... I bought coins worth five (six, seven) thousand rubles. And now, after just 5 years (or 6-8), their value has increased 5 (10-20) times. On average, the price increased by twenty (30 - 40 - 50) percent per year.”

Provides various examples of coins, prices, quotes and much more.

Let's think logically.

There is an area of investment in brands, wines, and works of art. If I ask you, which brand is better to buy, so that in 10-20 years, its value will increase several times. You probably don't know. Why? Because you are not an expert at this.

In the case of coins it’s the same. If someone once successfully bought coins and made decent money, this does not mean that the same will happen to you.

What determines the price of coins? Why are some coins worth several times more than others? With the same level of mintage, circulation, weight, country of production and year of issue.

Why, other things being equal, do some become more expensive over time, while others do not? Do you know the answers to these questions?

I don't know for sure. We need to figure it out. And the deeper you start to dig, the more you realize that you are a complete layman in this matter.

What to do? Or go completely deep into the topic, spending a lot of time studying the issue. Moreover, the knowledge gained will not guarantee a 100% result when “properly purchasing the right coins.” Or just point your finger at the sky and buy coins at random. You'll be lucky or unlucky in the future. Will the price rise or not?

The most important question is why do you want to invest in coins? If you want to make a profit in the future, then first compare the amount of time spent on knowledge, the amount of investment and......the planned level of income in the future. Is the game worth the candle?

In coin investing, gold plays the least role. When world prices rise, it is not a fact that your coin will also rise.

Briefly, for your information...

There are investment and collectible coins.

What is the difference?

Investment cards are not taxed and have high circulation rates.

Collectibles are subject to VAT and are produced in limited editions.

The main disadvantage is the high spread, reaching 50-60%. It happens 100 and 200-300%.

The second inconvenience for investors is possible difficulties during the sale back. Where will you take the coin? To the bank? Many banks do not buy back their coins. There is only sale. Among collectors? Damn, there are a dime a dozen of you “lucky” ones. If you want to sell quickly, reduce the price several times.

There is a price list of coins on the Sberbank website. Of the 3.5 thousand types of coins, the bank is ready to buy only about 200 (6% of the total). And the most interesting thing... at prices almost 2 times lower than the sales price.

To summarize: An investment method for experts only. Or, to satisfy your interest, you can purchase several “golden” coins for a small amount.

Method 2: Universal - open compulsory medical insurance

An impersonal account is an excellent option for those who decide to speculate on gold, but do not want to incur additional costs. Compulsory medical insurance is an analogue of a deposit, only the main unit of account is not currency, but grams (or tenths of a gram for gold). You can buy any amount of virtual gold and sell it when the price reaches the desired level.

Pros:

no need to bear transportation and storage costs;
prices for compulsory medical insurance are more volatile, there is a chance to speculate;
convenient – buying and selling can be done directly in the online store;
There are no problems with the implementation of compulsory medical insurance.

It is also possible to order bars from the bank that are equivalent in weight to the grams purchased at compulsory medical insurance. However, you will have to pay delivery and VAT.

Cons of compulsory medical insurance:

no interest is accrued on the deposit balance;
draconian spreads;
the money in the account is not protected by the DIA; if the bank collapses, you will not receive compensation;
The account cannot be transferred to another bank.

It should be taken into account that after selling the metal with compulsory medical insurance at a profit, you must pay personal income tax on the income. The investor himself acts as a tax agent. True, if you keep the account active for more than 3 years, you can get a tax deduction of 3 million rubles for each year of ownership. For the average investor, this size is more than enough.

Is investing in gold profitable?

Although the article is about investments, I would like to point out an important thing.

GOLD IS NOT AN INVESTMENT. It does not add value.

In simple words. By simply depositing money at interest in the bank, by the end of the term you will receive back the body of the deposit + something on top in the form of interest.

By purchasing Gazprom shares, you own a piece of the business. And you participate in generating profits in the form of rising quotes or annual dividends.

By buying gold.....you will not receive anything from above. In addition to possible price changes. But in fact, you simply record the quantity of grams or kilograms purchased.

I definitely won’t recommend whether you should invest in gold or not.

I’ll just give you a few graphs and numbers. How quotes changed over certain periods.

Over the past 15 years, the gold rate has increased from 348 to 2,609 rubles. Of course, the depreciation of the ruble also contributed. But we have what we have.

For a decade and a half, the profit is 650%!!!

Gold - chart in rubles

If you look at the same chart in dollars, the picture changes a little. Since mid-2011, the rate has been gradually falling. And for the last 2-3 years it has been marking time.

Gold chart - dollar prices

I think the most important thing you should know is that gold doesn't always go up. Even in the long term. Look at the graph below. In 1979, gold, having reached its peak, began to decline.

The decline lasted 20 years - until the early 2000s. And prices approached the 1979 level only 25 years later.

Wait a quarter of a century to get back just your initial investment? Unreal! And given inflation during this time, investors are in deep red.

Method 3: Confused - buy coins

This is the way of real samurai. We are talking about investment coins. Sberbank sells them especially a lot; it even has a specialized store on Arbat.

What's the catch? Bullion coins are highly valued by collectors, and if there are few of them, the price begins to rise. This is where you can make money. However, predicting which coin will rise is like guessing which horse will finish first: predictions can be made, but there are no guarantees.

Most often, investment coins are bought as a gift or for the purpose of further resale by professional resellers with high turnover. For a simple investor, holding savings in such coins is not the best idea.

On the other hand, one successful transaction on the market for collectible gold coins can give such a profit that stockbrokers have never dreamed of.

Where to invest in gold

We figured out the price dynamics. And if you are not burned out and still want to invest money in gold, let’s look at investment options.

But before that, you need to clearly understand - why do you actually want to buy gold? Namely, for how long? Is it likely that you will sell some or all of it if necessary?

You need to choose a strategy for yourself. Conventionally, we get a division into short-term (speculative) and long-term (investment).

It is important to make a decision right now (on the shore). And not after investing funds.

Why?

The method of investment will directly depend on the choice of strategy.

You will be surprised, but it may turn out that if world prices for gold rise, you personally will receive a loss.

Do you think this is impossible? Ha ha ha. Still as possible.

Go……

Method 4: Tricky - buy shares of gold mining companies

If you personally don’t want to bother with gold, but want to make money from precious metals, you can buy yourself a piece of a gold mining company. To do this, it is enough to have an account with any Russian broker and several free thousand rubles in the account.

I will not talk about the features of investing in shares, the pros and cons of this financial instrument - this is beyond the scope of the article. I will only note the shares of which Russian public companies you can buy:

Lenzoloto;
Buryatzoloto;
Pole.

And here’s another interesting article: What is split and consolidation of shares in the stock market

There are also LLC securities, but they are traded outside the market and their purchase should be approached with caution. There are also GDRs (global depositary receipts) traded on the Moscow Exchange of the following Russian companies:

Nordgold (“subsidiary” of Severstal);
Polymetal International plc.

There are also foreign companies, but their shares are traded mainly on the London and New York stock exchanges, for example, Barrick Gold (ticker ABX), Newmont Mining (ticker NEM), GoldCorp (ticker GG), so it is difficult for a Russian investor to approach them get there.

Well, still a couple of tips. You should buy shares of gold mining companies when the price of metals begins to rise significantly, and sell them at the peak of their value, without expecting prices to fall. Well, it’s better to diversify the risks by adding shares of some reliable mining companies, for example, Gazprom or Alrosa, into the “gold” portfolio.

Unallocated metal accounts (OMS)

Anonymized metal accounts (OMA) in banks have two advantages. Firstly, they can be freely issued even for an infant. Secondly, if owned for more than three years, they are subject to a property tax break, and you will not have to pay personal income tax on the increase in the value of the precious metal.

The disadvantages of compulsory medical insurance are the large difference between buying and selling gold, as well as the investor’s strong dependence on the reliability of the bank. Compulsory medical insurance is not insured by the Deposit Insurance Agency (DIA). Therefore, if the bank closes, it will be very difficult to get your investment back. So you need to either choose a bank that will withstand even the most severe crisis, or invest in a mutual investment fund (UIF) Gold.

Method 5: Risky – play on Forex

This is a method for extreme sports enthusiasts. What's the point? Register with any Forex broker that allows you to trade with an instrument such as GLD / USD (or XAU / USD) - and go ahead, ride the waves of the exchange rate.

Pros:

ease of opening an account;
no complications in the trading platform interface;
Fabulous earnings are possible literally in moments.

Minuses:

huge (no, like this: HUGE) risks due to the volatility of the instrument;
fraud on the part of the broker or technical errors, such as slippage, cannot be ruled out;
you need to study a lot and tediously to learn how to make a profit.

Outwardly, everything is simple: bought cheaper, sold more expensive. But here everything is like in poker: behind the external simplicity there is a whole scattering of pitfalls, and many of them are not precious.

You can reduce risks this way: choose a reliable broker or invest in the account of a professional manager who trades on a “gold” instrument, for example, through the PAMM account service.

Determination of the cost of bars with purity 999

Before you invest money and open your first investment in gold, you should learn how to calculate the current price of 1 gram of the precious metal with a three-nine purity. Sberbank reports changes in quotes based on international market dynamics every day. Among the reasons determining the change in the price of bullion are the following:

Demand among investors.
Quality of the precious metal.
Reliability of the bullion manufacturer.
Volumes of gold produced in the world.
The state of bank gold and foreign exchange reserves.

The estimated price of gold bars is determined by the bank based on these factors. In a simplified way, you can calculate the cost of 1 gram of precious metal yourself if you compare the price of one ounce of gold and the dollar exchange rate on the current date. The amount of value added tax must be added to the resulting figure.

This simple calculation will help you competently open and maintain a gold deposit in Sberbank.

Method 6: Advanced – buy an option or futures

This option is for sophisticated investors. In terms of risk level, futures instruments are somewhere between stocks and forex. But this is the only real way to make millions in a few successful trades, regardless of the value of the underlying asset. A common mind and sober calculation are enough.

An option is a derivative financial instrument that allows you to buy an underlying asset at a previously agreed upon price. This is not the disgrace that is happening at binary options brokers, but a full-fledged exchange asset.

Futures are almost the same, but the seller and buyer are obliged to conclude a transaction, no matter what the price of the underlying asset turns out to be. In the case of an option, the seller may not exercise his right and not sell the instrument if the price does not suit him.

And here’s another interesting article: Everything about impersonal metal accounts: opening, profitability, pros and cons

The price of options and futures themselves varies depending on the underlying price of the asset, its prospects in the market and the volume of the derivatives themselves. Well, for example, if gold becomes cheaper, then expensive options become unprofitable for sellers, and they urgently get rid of them. And if the price rises, then enterprising buyers can outbid cheap options and get gold at a price below the market.

Factors influencing the price of gold

Now let's look at all those aspects that can play into the hands of a potential investor who has decided to invest in gold . The right timing often eliminates the need for a long wait for the price to rise. Although, you need to understand that this is not Bitcoin, there will not be instant movements of tens of percent.

That is, investments in gold fully reflect the nature of such activities among large investors. We’ve invested, we’ll continue to wait patiently. The main idea is that gold cannot depreciate in principle, and there are no prerequisites for a large-scale fall.

Let's move on to the factors that affect the price of gold:

Public instability . There could be anything here - from an exchange of artillery strikes between the two Koreas to a technical default in the United States, that is, everything that is presented with loud headlines in the media. It was this possibility of default that led gold to rise above $1,900 per troy ounce during a period when Democrats and Republicans could not agree on raising the debt ceiling in the United States. At that time, only the dumbest people spoke about this in the economic environment.
Non-public instability. Here we are talking about things that are in the news, but that the general public doesn't pay much attention to. For example, the conflict of interests of the same United States with Russia and China has led to the fact that the share of dollars in our reserves has decreased to very insignificant values, while gold reserves (namely physical gold, that is, in bullion) are growing at an accelerated pace. It's a similar story in China. You should not ignore such facts; at first they seem completely unworthy of attention, but in the end they may turn out to be decisive.
Investor sentiment towards the dollar . Yes, gold is usually valued in dollars, so all trade is designed for this expression of value. But, unlike the metal itself, the dollar is essentially just a piece of paper. Therefore, in those periods when it rises in price, the value of gold in dollars decreases - everything is simple here, it’s an ordinary fraction. At the same time, the weakening of the dollar for any reason leads to an increase in the price of the metal. Many draw parallels with the way currencies move against the dollar and the way gold moves. They do not always correlate, so you should not focus on this alone. Investing in gold is a completely separate topic.
State of the World Economy . There is no need to carefully monitor all indicators (inflation, unemployment, production, GDP, etc.). If everything really starts to slow down, as, for example, it is happening now in Germany, then such events may become a good prerequisite for gold to soon become an attractive asset, and, as a result, active purchases will begin on the part of large-scale investors. This is all usually covered in the media, on television. At the same time, you just need to distinguish ordinary chatter from really important information. A single decrease in any indicator means nothing, but a comprehensive decrease should make you think.

At first glance, it may seem that everything described is quite complicated. But that's not true. It is enough to look at the main markets – foreign exchange, stock – once a week. Again, all this applies to those who want to buy at the most convenient time, just before growth. For other investors, buying gold will be profitable in one way or another, it all depends on the goals. We will talk about them further.

Interesting poll at the end of the article!

Don’t leave early - take the survey) It’s both useful and informative)

Go to survey>>

Method 7: Trust – invest money in a mutual fund or management company

If you are fed up with everything - Forex, derivatives, compulsory medical insurance - and your head is spinning from oscillators and stochastics, and you want to make money on gold, then you can simply buy shares of companies that deal with all these things. Fortunately, there are enough mutual funds betting on gold. This:

Sberbank - Gold;
Alfa Capital - Gold;
Gazprombank - Gold;
Kapital – Gold;
Gold standard (UK Region);
Metropol Golden Fleece;
RGS – Gold;
MDM - Golden City (closed mutual fund) and a number of others.

Most often, they do not invest in “pure” gold, but purchase shares of gold mining companies or shares of ETFs - investment funds. Some hold derivatives assets.

Pros:

returns like gold without any worries;
shifting risks onto the shoulders of managers;
low entry threshold;
the possibility of obtaining a tax deduction (after 3 years of owning shares of mutual funds, you do not need to pay personal income tax).

Minuses:

management costs;
risks always remain;
You can earn more in other ways.

So, gentlemen, there are different ways to invest in gold. Choose your method and increase your capital. May the gold be with you!

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Paper gold

The difference between physical gold and paper gold is that you don’t receive anything in your hands. Your rights to precious metals are recorded on paper, in a computer, or in a register. It’s like the difference between real banknotes and money on a card in a bank. In fact, the meaning is the same. You can only touch the first ones, but not the second ones.

Compulsory medical insurance

Compulsory medical insurance is an impersonal metal account.

When you open a compulsory medical insurance account at a bank, you are not buying gold itself. And his course. A certain amount of grams of metal per amount deposited. The bank sets quotes based on the Central Bank exchange rate. Naturally, increasing the price a little, taking into account your interest.

Conventionally, gold costs 2500 per 1 gram. For 10 thousand you can buy 4 grams of gold.

If the price rises to 3 thousand, you can safely sell and get 2 thousand on top.

Compared to buying bullion, the price of gold is the same for everyone. Regardless of the amounts available. Moreover, it is not necessary to buy in multiples of grams (ounces, kilograms).

Fractional investments are quite acceptable. 45.5 grams or 37.2. And even just half a gram. There are no minimum restrictions on the purchase amount as such.

The main advantage of this method of investing is the complete absence of storage fees. Keep your compulsory medical insurance account for at least 100 years. You won't pay a penny to the bank.

Compulsory medical insurance is not burdened by the problem of liquidity. At any time, gold from the account can be sold to the bank. At the current rate.

But..... we have another unpleasant moment in the form of the spread. That is, the difference between buying and selling.

One of the main mistakes novice investors make is not understanding this point.

For example. You have decided to open a compulsory medical insurance and buy precious metals. Your actions?

You'll probably want to find the bank with the best deals. Conduct a small comparison analysis among the largest credit institutions. And you will find the lowest prices for gold sales. Great. You think. You open a compulsory medical insurance and buy precious metals.

What's the catch? Buying gold is not like going to the store for potatoes, bread and milk. )))

Then the gold will need to be sold if necessary. And to whom? Back to the same bank.

And here an unpleasant surprise may await you in the form of a not entirely favorable buyback rate.

As a result, even if you buy gold at the best price among banks, you can lose significantly on the sale.

And the net final result will be worse than with the same operations in other banks.

Therefore, first of all, evaluate the size of the spread. It can reach 10-12%. Guess where? (Hint: the most popular bank in the country).

On average, the size of the spread on precious metals can vary from 2-3 to 10-12%.

Two additional tips to help you save some money:

Internet banking is more profitable. If you compare prices in a bank branch and your personal account, you will notice, although small, a more favorable price for buying and selling. Within 0.2-0.3%.

Why? They give you a discount for completing transactions yourself. You do not waste specialists’ time on processing and purchasing precious metals.

I don't know how things are now. But in 2008, I opened compulsory medical insurance at Sberbank. Naturally, there was no talk of any online banking or mobile applications.

I stood in line to see a specialist (about 40 minutes exactly). Then bank Marinka worked her magic with the account registration. I constantly asked my more experienced colleagues in this matter about all the nuances of opening an account. I printed out the contracts on…..ten sheets.

I read it (I always read documents before signing them).

As a result, after 30 minutes the account was opened. They gave me a savings book.

Then they sent it to the cashier. Deposit money into the account. And there’s a line again. (((

After payment, I was given a receipt order to deposit funds for compulsory medical insurance.

I'm with Marinka again. She made an entry in the Savings Book about crediting so many grams of gold to my account.

And now I am the happy owner of an impersonal metal account. It took about an hour and a half to do everything. Well, these are minor things. It's true?

Compulsory medical insurance was replenished in the same spirit. You first get an appointment with Marinka. She prints out a piece of paper for you to give to the cashier. You go to the cashier. You deposit money. You bring the receipt of payment to Marinka again. And only after that you receive a savings book notification about the crediting of additional grams of precious metal.

Just tough.

Time matters. Considering that the bank takes the Central Bank rate as a guide, it can increase its interest to a greater or lesser extent.

On weekends and holidays, the rate, like the spread, is less profitable for clients. Cause? Insurance in case of unforeseen force majeure circumstances in the market. A sharp movement in quotes - and it turns out that the bank was selling gold at unfavorable prices.

Therefore, during the holidays, banks always increase the selling rate. And they reduce the purchase price. Widen the spread.

Additionally, it is not advisable to perform transactions before the weekend and during non-working hours (in the evening and at night).

Another feature of many banks is the widening of the spread when quotes move sharply in one direction.

Again the bank's insurance. If gold rises, many people want to participate in it. Speculate on growth. And then sell it for a profit. This means losses for the bank. So they try to minimize possible future losses.

CONCLUSION. Given the certain level of spread, OMCs are not very suitable for short-term speculation. Mainly aimed at medium- and long-term gold ownership. Even taking into account the possible high spread, the long-term free storage method spreads these costs over time. Conventionally, they paid 5% on top. But with an investment period of 10 years, it will cost you only 0.5% per year.

Precious metals mutual funds

We are looking for funds that invest money in gold.

I recommend: What is a mutual fund and how to make money on it?

The average price of a share for new clients is about 5,000 rubles. The purchase of additional shares starts from 1 thousand.

A list of mutual funds focused on precious metals can be found at the link...

In its purest form, the funds do not invest only in gold. Usually the portfolio includes either the “magnificent four”:

gold;
silver;
platinum;
palladium.

VTB - precious metals fund
Or some mixture of precious metals and money market funds or bonds. Part of it is invested in gold and other metals (usually through ETFs). Some of it is held in other instruments.

Using the example of Alfa Bank Mutual Fund - Alfa Capital GOLD.

You see, 83.17% is occupied by gold ETFs (silver, etc.).

So what we get:

the minimum required amount to start investing is only a few thousand;
the ability to buy and sell at any time at the market price. True, you will usually receive the money within 2-3 business days. By law, the management company is obliged to pay the shareholder within 15 days.

It would seem that this is an almost ideal tool for investing in gold. I bought shares of some gold fund. And the management company will take care of the rest.

So? No, not like that.

Remember, it was described above that the compulsory medical insurance spread can reach 10-12%.

In mutual funds they will charge you an average of 1-3% for the purchase of shares. And usually, if you own it for less than 3 years, you will still retain 1-2% upon sale.

And for the management of the mutual fund they want a small percentage. About 3-5%. Only for each year.

Roughly speaking, with a 5% commission, for 10 years of holding shares, you will have to leave half of your capital in the management company.

By investing through mutual funds, you will underperform the market by 3-5% every year. Gold will increase by 10% in a year, your profit will be only 5-7%. If the gold stagnate, you will receive a loss equal to the commission amount.

I recommend: Why do mutual fund shareholders lose money?

Using the example of a regular gold fund, the size of the shareholder’s annual mandatory expenses.

We get management costs of 3.3% per year.

The real picture of how much fund shareholders lose (underreceive) can be seen by comparing the dynamics of the gold rate and the profitability of gold mutual funds for a certain period. For example, in 3 years.

Gold has grown by 12.65% over 3 years. Not so much. What about mutual funds?

Over the same period, Alpha had the best result - +4.96% . The worst is almost -5% . It is clear that gold is not included in the composition in pure form, but in a certain proportion. But the result is not impressive at all.

The difference is precisely explained by the annually withheld commission.

Despite the high costs in the form of commissions, mutual funds have pleasant features that investors need to know about.

When holding fund shares for more than 3 years, the investor is exempt from income tax. Let me remind you who did not know (or forgot) - profits received from trading securities are subject to taxation at a rate of 13%.
It is possible to exchange shares within the same management company without tax consequences. That is, if you, for example, sell shares of VTB, and want to invest in another direction (stocks, bonds), but in another management company, you will be charged 13%. If your current management company has a similar program, you simply exchange shares without taxes.

Let me summarize. Investments in gold through the purchase of shares are recommended for short-term periods of 1-5 years. Taking into account tax benefits and the possibility of exchanging shares.

Gold ETF

You might be surprised, but mutual funds themselves do not buy gold directly. It is included in a share of either compulsory medical insurance or foreign ETFs.

Compulsory medical insurance is written above. But the ETF...

Read: Why are ETFs needed?

The annual cost of owning ETF shares is tenths of a percent. Now compare with the commissions charged to our shareholders - 3-5%.

You can, of course, independently open an account with a foreign broker and buy the necessary gold ETF shares. With lower commissions.

But …. Several obstacles await us here:

The optimal minimum amount for opening is 10-20 thousand dollars.
Broker's monthly expenses are $10-15.
The need to pay taxes yourself.
And of course, you need to figure out which reliable broker to choose, spend time opening an account and mastering the “infidel” trading conditions, and many other nuances.

In Russia there is an alternative to foreign funds - gold ETF from Finex. FXGD.

To purchase, you need access to the exchange (you can open an account online in 20 minutes and in a couple of days you will be able to buy assets).

Main advantages:

the cost of the minimum lot is about 600 rubles;
annual management fee - 0.45% per year. Compare with mutual fund))))
high liquidity - at any time you can buy and sell the required quantity at fair prices.
low spread - about 0.2%.
you can buy shares within an open individual investment account and receive tax benefits;
if owned for more than 3 years - exemption from income tax.
broker-tax agent. He will calculate everything for you and transfer the required amount to your budget.

The disadvantages include the need to open a brokerage account and the associated brokerage commissions and depository costs.

With the right broker, the total annual expenses for long-term investing will be 200-300 rubles.

Possible slight deviation of the share price from the official quotes. This is called tracking error. For FXGD it is 0.07%. This is more a plus than a minus.

For example, since the opening of the ETF in 2013, when compared with the standard (benchmark), the discrepancy in prices was 2.9%. In 5 years. It turns out that the commission amount is 0.45% + 0.07%.

Overall: ETF is suitable for both short-term speculation and long-term holding.

Buying precious metals on the exchange

You can buy gold directly on the Moscow Exchange. I’ll say right away that I haven’t encountered it myself.

There is a conflict of interest here. The largest broker banks do not offer this opportunity to buy and sell for their clients. In order not to crush your other “golden” services: compulsory medical insurance or mutual fund. From which they receive tens to hundreds of times more in the form of commissions.

Therefore, only small and unpopular brokerage houses have this. You won’t find this in Sberbank, VTB or Otkritie.

The main problem is the risk of broker bankruptcy. And the subsequent “delights” of transferring the purchased gold to another broker. Where should I transfer it? Again to a small broker who has such a service for trading gold on the stock exchange.

Added: November 2021 Broker Otkritie now has the opportunity to buy gold on the exchange. Investor expenses are limited only by exchange and brokerage commissions (tenths to hundredths of a percent). You can store purchased gold for free. For most investors, buying gold on the exchange will be the most profitable option for investing in precious metals. metals.

Buying contacts or futures

In short. For information. Primarily designed for short-term speculation. Futures are traded on the derivatives market (access through a broker is required).

It is based on knowledge of at least the basics of technical analysis. And understanding the meaning of the derivatives market.

Disadvantages:

Increased risks due to trading with leverage.
Futures have a limited validity period - usually 3 months.

To summarize: it is absolutely not recommended for beginners.

Conditions for opening a deposit

Conditions and tariffs for opening deposits are posted on the official websites of credit companies, directly at representative offices. The opening of a deposit is carried out through the conclusion of an agreement for the opening of compulsory medical insurance in the form of the bank. The transaction is carried out by purchasing unallocated metal from the bank at the current rate, which is established by the credit institution.

The contract can be concluded by any adult citizen of the Russian Federation upon presentation of a passport. Citizens aged 14 to 18 years old open an account on their own with parental permission. A deposit can be opened in the name of a minor by his legal representative (parent, guardian).

Types of deposits:

Current. Can be topped up or closed at any time. Profit from investments depends on the growth of metal prices. The investor gets the opportunity to quickly respond to changes in the market situation. Interest is not accrued on this type of placement of funds.
Urgent. The contract is concluded for a certain period. In addition to the growth in the value of assets, the investor’s profit consists of interest accrued on the deposit (subject to the investment terms).

Parameters that determine the profitability of the transaction:

interest rate, depending on the conditions and the bank, it can be from 0.2 to 4% per annum;
account maintenance fee (on average 1%);
possibility of replenishment and partial withdrawal, transfer to other accounts;
there is a restriction on the minimum investment amount.

How to open a deposit

A deposit can be opened through a bank representative or using Internet banking. Having chosen the first method, the client simply comes to the bank with a passport and money, the manager will prepare all the necessary documents. After depositing money and signing the contract, the transaction will be completed.

When using the second method, a visit to a credit institution is not required; you only need a bank card from which the funds will be transferred and a passport.

An example of opening a compulsory medical insurance in Sberbank:

Authorization in Internet banking or mobile application.
Enter the “Metal Accounts” section, select “Gold”.
Fill out the form.
Read the terms and conditions for opening a deposit, agree to them and transfer money from the card.