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Why Singaporeans always lose money in gold investments

Ignorance is one of the main reasons why investors consistently lose monies when it comes to investing because the biggest risk comes from not knowing what you are doing. The second factor is greed, which causes investors to lose sight of the risks involved in alternative or exotic investments. In the pursuit for higher returns for their monies, those who are greedy overlook or underestimate the risks involved. Thirdly, arrogance is the ultimate downfall for those who don’t respect the market. Always remember the golden rule that you can never win the market consistently, so avoid leveraging your investments if you don’t have the holding power. Yes, leveraging can increase the profit margins, but it can also backfire and widen your losses when the market turn against you.

In early February 2015, news broke out that more than 250 Singaporeans lost an estimated $35 million in yet another flopped gold buy-back scheme operated by Suisse International. Unhappy investors gathered outside the police headquarter trying to lodge police reports to the Commercial Affairs Department (CAD). It was amazing that after so many widely reported cases of gold buy-back scams, Singaporeans still fell prey to such schemes. There were a few who even claimed to borrow a few hundred thousands from the banks to invest. Some even encouraged their friends to invest in the programme.

In my view, it is unlikely that the investors would get back their hard-earned monies. Losing money from scams or flopped investment schemes is a painful feeling but investors who learn from this experience would come to understand how to invest in gold in the right way. The reason why Singaporeans consistently lost money in gold investments is because of the above factors – ignorance, greed and arrogance. Most investors do not know much about gold-back schemes and how the companies generate returns. There is no pricing transparency because the companies would supposedly sell you the physical gold bars and coins at a “discount of 1.5 or 2 percent” and buy back at higher price when in fact you are paying a premium of 20 to 30 percent to the market price. In a scheme whereby the actual bullion is held by the companies, then there is greater liquidity risk in which the companies would not or unable to deliver the gold to the investors.

Driven by greed, the second mistake is that most gold buy-back victims would borrow money and pump all their money into the schemes, in the hope of making even more money. They don’t realize that they might lose their entire fortunes or even become bankrupt in the event that the company folds. This is especially if the company “recycled” the gold with multiple customers. The worst thing is when investors induced their friends and relatives to participate in such a scheme. They must be feeling very bad and guilty for causing their loved ones to lose so much monies.

The best way to own gold is to buy gold bullion from reputable or trustworthy dealers. Indeed, owning bullion is expensive because of storage and transportation costs. In addition, bullion does not give you dividends or expected return. However, owning bullion can give you a peace of mind knowing that your money is real and is in your own good hands. You don’t have to worry about the daily prices of gold and should try to hold it for the long term. This is because owning bullion is about diversifying your assets and protecting your purchasing power for the long run.

So join me in my wealth building journey and learn more about the right way to invest in gold!

Magically yours,

SG Wealth Builder

Updated: February 14, 2015 — 2:58 pm
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