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Home » Gold: An Insurance Policy for Investors

Many friends always ask me whether it’s a good time to buy gold, especially over the last six months. My response never changes – “it is always a good time to buy gold, especially if your investment portfolio is denominated in an emerging market currency like the Ringgit.”

Over the weekend, one of my closest friends asked me how much more upside was there in the gold price given its recent performance. I reminded him that he should see gold as an ‘insurance policy’ against his investment portfolio rather than just another investment to buy and flip six months down the line. We argued back and forth before I decided to tell him about my personal situation.

Like my friend, I want to make as much money as I can- I have my children’s education to pay for! But, as much as I want to make money, I dislike losing money even more. So it’s safe to say that I am a bit more risk averse than he is.

When we launched HelloGold back in April 2017, gold was below RM200 per gram and the KLCI was comfortably above 1,700. Given the funds I had already invested in the Malaysian stock market, I put whatever remaining savings I had in gold. For 18 months, it didn’t look like the smart thing to do – by September 2018, even though the KLCI was practically unchanged, gold had dropped by 10%. However, I didn’t mind that much because I see gold as an insurance – after all, we all buy insurance year in year out in the hope that we don’t make any claims because if we have to claim on our insurance, it would have meant that something bad must have happened.

Gold vs KLCI chart

Source: Yahoo Finance

However, since September 2018, gold has increased in value by 70% while the KLCI has dropped by more than 10%. As a result, I haven’t lost any money in my gold, but gained more value from it.
Seeing that my oldest son is starting law school, I’m able to afford his tuition by selling the gold I had accumulated over the last few years. In turn, I don’t have to sell my shares which are underwater at the moment, in hope that they will recover in value when better times return.

After I told my friend my story, I asked him what his insurance policy was for his investments.

He had none.

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