The increase in financial culture has allowed more and more people to approach the world of investment, devoid of the prejudices and reverential fear that this sector, once only for initiates, instilled. New formulas for investing, based on simplicity, such as the so-called management or passive investment, are becoming more and more popular.
The world of investment ceased to be the exclusive preserve of a few insiders a long time ago, who had the necessary knowledge to enter unknown territory. The increase in financial culture and the effort of some companies to make investment accessible to citizens with modest savings has allowed, today, anyone with a surplus of money to consider investing it.
It is true that the recent economic crisis and some bad practices in the marketing of financial products by banks (preferred shares, swaps, structured products, Icelandic bonds…) have increased mistrust among less experienced investors, fearing that fall victim to a scam.
What is passive investing?
One of the concepts that has become fashionable in recent years has been that of passive investment . In general terms, passive investment management (characteristic of retail investors) is identified with placing savings in moderate-risk financial products, such as fixed income or shares, with the aim of receiving annual remuneration, without the need to keep a detailed control and carry out a detailed management of it.
Strictly, investment or passive management is based on the theory that the market is mature and efficient, so it is a waste of time and money to carry out prospecting and predictions about future developments, in order to obtain returns higher than those of the market itself.
Therefore, passive management relies on securities and instruments with a moderate risk and a predictable evolution, as close to the market as possible.
Passive investing characteristics
Among the main characteristics of active investing are the following:
• These types of investments follow the markets instead of trying to outperform them.
• It is cheaper than other options, since it does not imply paying high commissions to reward managers, since management is much easier.
• Its turnover is low: the titles remain in the investment portfolio for a long time, so it has a significant tax benefit , since no capital gains taxes are generated.
• It offers greater diversification than other investments.
• It saves a lot of time (and worries) in management.
Physical gold, the alternative
Investment gold , on the other hand, can be an interesting alternative to passive investment, but without that risk component that characterizes active management. A review of the revaluation data of the different investment assets serves to assess the role that gold has played.
According to the World Gold Council , in the last 20 years the precious metal has exceeded the revaluation of the main assets (US shares, Treasury bonds, raw materials, the dollar…), being only behind the revaluation of the shares of emerging countries .
The comparison with the main world currencies is also completely favorable to gold, which has exceeded its appreciation since the year 1900, as can be seen in the graph.
Advantages of investment gold compared to passive investment
As for the advantages offered to investors by passive management, physical gold also has a lot to say:
• More than matching the markets, the revaluation of physical gold even surpasses them , making it a very interesting investment option, with no risk.
• Investing in gold does not require many commissions : just the premium that the bullion or coin carries and, in the event that you want to transfer its custody to a specialized company instead of having it at home, a moderate monthly cost.
• Physical gold also has tax benefits , as it is exempt from VAT in the European Union and is only subject to capital gains tax when sold. Keeping it in the portfolio does not mean paying more taxes.
• In terms of diversification, gold is king : the main portfolio managers recommend including between 2 and 10% gold, to take advantage of its safe-haven nature and its low correlation with other assets.
It also does not require much time to manage. You simply invest in it, with the peace of mind that comes with having an asset that does not depreciate and that can become liquid at any time.