TURN COINS INTO AN IN­VEST­MENT

There are gold coins, old coins, Kruger­rands, medal­lions and Bit­coin – but which is the least risky in­vest­ment? in­ves­ti­gates

CityPress - - Business -

If you were to say to some­one that you’ll be in­vest­ing in coins, what you’d be re­fer­ring to may not be so ob­vi­ous any more. In years gone by, a pop­u­lar choice was the Kruger­rand and then gold medal­lions. Lately, cryp­tocur­ren­cies such as Bit­coin have pre­sented them­selves as vi­able in­vest­ment op­tions.

Here are some dif­fer­ent in­vest­ment choices and their po­ten­tial re­turns:

KRUGER­RANDS

This year is the 50th an­niver­sary of the Kruger­rand. The gold coin has a che­quered his­tory as it was used dur­ing apartheid to smug­gle wealth out of the coun­try.

How­ever, it has been a rel­a­tively sta­ble in­vest­ment choice. Had you bought one in 1967, it would’ve cost you R25. To­day, its worth more than R17 300, which means it’s en­joyed a com­pound growth rate of 14% a year, al­though, un­like a share in­vest­ment, it does not pay an in­come and comes with hold­ing costs such as in­sur­ance or safe cus­tody.

Arno Egan, di­rec­tor of Mr Kruger, a bul­lion spe­cial­ist in Pre­to­ria, says: “I think gold has its place in peo­ple’s portfolio. But, like any­thing, you shouldn’t put all your eggs in one bas­ket. Roughly, the value [of the Kruger­rand] dou­bles every five years.”.

The ad­van­tage of in­vest­ing in the Kruger­rand is that it’s a “proudly South African prod­uct” that is well es­tab­lished lo­cally and abroad. In­vest­ing in gold gen­er­ally pro­vides a safe haven in times of global fi­nan­cial tur­moil.

Chan­tal Marx, head of re­search at FNB Se­cu­ri­ties, says: “Gold is a pre­cious metal and its value is not in­flu­enced by the same fac­tors that af­fect other as­set classes. Gold could be held along with other as­set classes such as eq­ui­ties, bonds, prop­erty and cash as a means of di­ver­si­fy­ing.”

How­ever, there are also dis­ad­van­tages.

“The Kruger­rand doesn’t pay you a div­i­dend. If you have prop­erty, for in­stance, it would also es­ca­late in value, but it would give you an in­come and, if you have shares, you would have a div­i­dend,” Marx says.

You can buy Kruger­rands though nu­mis­matic deal­ers. Check to see if your ven­dor is ap­proved by the SA As­so­ci­a­tion of Nu­mis­matic Deal­ers and the SA Mint. Al­ter­na­tively, banks also sell them. FNB, for ex­am­ple, lets you buy and sell Kruger­rands through its share in­vest­ing plat­form.

When in­vest­ing in gold medal­lions and coins, you have to be care­ful and do your re­search be­cause their value is based on de­mand and rar­ity, rather than the gold they con­tain.

“It’s a col­lec­tor’s prod­uct that you could buy at a 200% to 300% pre­mium, de­pend­ing on where you buy it,” says Egan.

So, if the medal­lion is not sought-af­ter, you may have some dif­fi­culty get­ting rid of it down the line, if that’s what you want to do. Com­pa­nies such as the Scoin Shop don’t guar­an­tee the re­pur­chase of gold medal­lions from cus­tomers. How­ever, if there is a de­mand for a par­tic­u­lar coin or medal­lion, they will buy it back.

“You have to know what you are do­ing. There is scope for this kind of prod­uct in the mar­ket, but it is more cum­ber­some be­cause you have to know what it is that you buy. Some peo­ple have been burnt,” warns Egan.

If some­one prom­ises you they will buy your coins back, make sure you have this in writ­ing.

BIT­COINS

While Kruger­rands and gold medal­lions are tan­gi­ble, cryp­tocur­ren­cies are vir­tual. The most well-known cryp­tocur­rency, the Bit­coin, is an on­line pay­ment sys­tem in­vented by the mys­te­ri­ous Satoshi Nakamoto, who sup­pos­edly cre­ated the pro­to­col used in the Bit­coin cryp­tocur­rency.

No one knows who he or she is and, when­ever some­one thinks they’ve outed the cre­ator of the Bit­coin, some­thing or some­one comes along to dis­pute the find­ings.

That said, Bit­coin has been dubbed “the new gold” and has be­come in­creas­ingly pop­u­lar.

One of its ad­van­tages is that you can trans­act di­rectly with a per­son who wants to buy or sell Bit­coin with­out au­thor­i­ties such as banks and gov­ern­ments tak­ing a slice of the pie in taxes or charges. Not yet, any­way.

Bit­coin has en­joyed in­sur­mount­able growth and is up by about 200% so far this year. Some think the cryp­tocur­rency bub­ble is about to burst, as the tech bub­ble did in 2001.

Floris Slab­bert, coun­try man­ager of Ec­spo­nent Fi­nan­cial In­vest­ment Ser­vices, says: “I be­lieve cryp­tocur­rency is a dan­ger­ous thing to play with. Any­thing that goes up must come down. Make sure you fully un­der­stand it and the as­so­ci­ated risks.”

CON­SIDER STOR­AGE

Whether you in­vest in gold medal­lions, Kruger­rands or cryp­tocur­ren­cies, one of the big­gest is­sues is how to store these valu­ables.

When it comes to gold medal­lions and Kruger­rands, you should typ­i­cally keep them in a safe at home or, ide­ally, in a bank vault.

Tak­ing out in­sur­ance on the coins would be pru­dent, es­pe­cially con­sid­er­ing the high rate of home rob­beries and bank heists.

For Bit­coins or other cryp­tocur­ren­cies, stor­age and safety are also para­mount. You could store your Bit­coins on a USB drive (at your own risk) or through desk­top, mo­bile or on­line wal­lets. Stor­age comes with costs, so make sure you do your re­search.

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