475: Gold – Physical vs ETFs and Related Issues

When it comes to building wealth, I’m all about putting money into assets that work for you. 

Gold has been performing great this year and it has got a certain allure – it’s stable, it’s shiny, and it’s stood the test of time as a “safe haven.” 

But, to me, gold’s appeal has some limitations. It doesn’t generate income or adapt to a growing economy. It’s a static asset – just sitting there, relying on scarcity and market sentiment for value. 

Compare that to cash-flowing real estate, which earns rental income, appreciates with time, and reinvests in itself. With real estate, your money is working as hard as you are, creating compounding value. Gold, by contrast, just… exists.

Gold shines during uncertainty, which is why people flock to it during market turmoil. But cash-flowing assets, like real estate, can also perform steadily if they’re managed properly. The issues that real estate runs into in rough times relate to the leverage, not to the real estate itself. So, perhaps part of your real estate portfolio should be unleveraged?

Physical gold is tangible and can feel reassuring – like you’re holding real wealth. But it requires secure storage and insurance, which are ongoing costs. Gold ETFs offer easier access and are cost-effective, but in a true crisis, a piece of paper representing gold isn’t as solid as the real thing. Both have their pros and cons, but neither produces income.

Investing in real estate doesn’t just store wealth; it creates it. You’re part of the economy by providing essential spaces and earning rental income, all while the property value grows.

Real estate adapts, reinvests, and compounds – which gold doesn’t. In short, real estate has the flexibility to evolve with the market, while gold’s value remains static.

Gold isn’t free to own either. Physical gold comes with storage fees, insurance, and sometimes appraisal costs. Real estate has maintenance costs too, but those are more than offset by rental income. With gold, you’re continuously paying without any return – it’s a net cost, not an asset that actively pays you back.

But… I will concede one thing… gold has been around a long time and will continue to be in the future. As a hedge against inflation it has withstood the test of time. 

An ounce of gold once bought a Roman man a nice toga and pair of sandals and today it will buy you a very nice suit and pair of shoes.

And for that reason, you may still consider owning some gold. This week’s episode of Wealth Formula Podcast will give you some guidance on how to do that.

06:02 The Current State of Gold Prices

08:21 Physical Gold vs. ETFs: A Comparative Analysis

11:01 Understanding Counterparty Risk in Gold Investments

14:19 Tax Implications of Gold Investments

16:53 Best Practices for Storing Precious Metals