Shane asks: Recently you had an article about FNB selling Krugerrands. I am interested in buying some. They appeal to me as they are a physical investment that I can actually store at home, show friends and family and pass down to children and grandchildren.
The question is, is it a sound investment? Would I be better off in equities, or a combination of both?
Maya replies: It is interesting that your question does not mention the rapidly increasing gold price.
Your interest is that Krugerrands are tangible and something you can prove you own in a very uncertain world. It is this rationale in part that is driving the sale of gold coins. It is actually a more rational reason than chasing past returns.
But is it a good investment? Over the last 10 years, even including the recent rally in gold and fall in the stock market, Krugerrands have not outperformed equities.
Over time the stock market outperforms gold simply because the market generates an income. When you invest in shares of listed companies they pay income (dividends) out of their earnings. That creates a value that grows over time.
Gold is a very sentimental investment as it really is a gauge of the world’s fear levels. Gold tends to do well in very uncertain times, which is why it has performed very well over the last four years when the world’s economies have been unsettled.
There is a place in your investments for Krugerrands both as a hedge against uncertainty and in fulfilling a sentimental role in terms of passing on to future generations. But it should not be your only investment. Have some gold exposure but make sure you also invest in growth assets.
Safe keeping
One of the risks of Krugerrands is that they can be stolen. If you are concerned about the risk of keeping Krugerrands on your property you could put them in safety deposit box. Otherwise as you mentioned FNB Share Invest has a facility that allows you to buy and sell Krugerrands while they keep custody of your coins.
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