It seems like all investing attention these days surrounds tech stock, but there’s another market that is sitting in the wings, quietly gaining value: gold.
Yes, gold.
Specifically, gold value is up more than 6 percent since the start of 2018 — and it’s being helped by declines so far this year in equity mutual funds. In fact, if the current trends continue, it’s expected that gold value will increase by nearly 30 percent this year, and that’s something that investors will certainly be intrigued by.
If the current trends continue, gold and equity mutual fund values will essentially flip flop from what returns have been over the past several years for each option. Gold, for instance, hasn’t done well in the past five years, posting annual returns of about -1 percent. Equities, on the other hand, have posted double digit increases in this time. So why are things trending in a different direction?
Reversion to the Mean
Mean reversion, or reversion to the mean, is a concept that essentially says that things will return to their regular averages over time. Historically, gold has done very well in the market, especially during the recession of 2008. The thinking is that it will return to being a prosperous investing option.
Think of reversion to the mean like this: say you have a basketball player that is a 43 percent 3-point shooter. Now, say that player comes out firing on all cylinders, going 3-for-4 on first half three point shots. Because the player is a 43 percent 3-point shooter, and not a 75 percent shooter, there’s reason to believe that he’ll regress over the course of the game so that he’s shooting around his average eventually. The same can be said for gold. It used to be hot, went cold for a few years, and is looking to get back to its historically good returns.
In fact, gold’s 50-year annual return has been around 11.2 percent. Now, if projections hold true and gold does increase by about 30 percent this year, the reversion to the mean will likely still hold true and it will come down more around its average in subsequent years. But when the getting is hot, buying become more important.
How to Invest in Gold
So, with gold trending upwards, you might be wondering how to buy it. There are several ways, which we’ve outlined below. All of these methods of gold investing have their fair share of pros and cons. Have a look:
Another option is to purchase gold online from India’s Stockholding Corporation. Or, you could make your acquisitions through mobile wallets.
Log on to online retailers and purchase gold coins. This can be done on popular retailers like Amazon.com.
Lastly, another option is to visit your local brick-and-mortar jewelry store and buy physical gold.
The experts say that, despite gold’s favorable 2018 projections, it’s not going to fully rally until there’s demand for it. However, that demand could soon be coming, especially if equity mutual funds continue their slide. Another thing to consider is that if inflation continues to rise, interest rates are likely to follow suit. If this occurs, that would create an even more favorable outlook for the gold market. S
tay tuned, as ebbs and flows are a part of anything as far as markets are concerned. But, keeping an eye on gold in 2018 and beyond may turn out to be a wise consideration.
Regards,
Ethan Warrick
Editor
Wealth Authority
