How To Buy Gold With A Super Fund (SMSF)?

One of the potentially lucrative investments available to you in a self managed super fund is investment in precious metals; the likes of gold and silver. Investment in gold is a strategy that is advocated by some financial advisers particularly during turbulent economic times when gold appreciates in value based on speculation. There are a number of ways to buy gold through your super fund. These include investing directly in physical gold, purchasing of gold-backed traded securities through gold exchange traded funds (ETFs), buying mining shares and participating in managed funds.

Buying Direct Investments In Physical Gold Using A SMSF

You can convert a portion of your super fund into bullion by opting for the direct investment in physical gold strategy. There are various major bullion dealers in Australia who offer secure storage arrangements for investors of physical gold such as Perth Mint and the Australian Bullion Company. If you opt to invest directly in physical gold, you should consider the enormous responsibility that comes with direct ownership of physical gold.

In order to remain compliant you may also need to have a proper storage facility and confirm that the purchase is for the benefit of the fund members.  Under Section 52 (2) (b) of the SIS Act it states ? to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as an ordinary prudent person would exercise in dealing with property of another for whom the person felt morally bound to provide;?.  Many gold bullion dealers have secure storage that you can rent for this purpose.  There is also no specific reference to getting insurance.

Buying Gold Exchange Traded Funds (ETFs)

Investing in gold ETFs is a major alternative to investing directly in physical gold. Gold ETF are funds listed in the Australian Stock Exchange (ASX) that offer exposure to the price of physical gold. Investors are able to buy gold-backed tradable securities that are approximately a tenth of an ounce of gold in Australian dollars. Since they have a ready market and are easily tradable on the ASX, they are convenient to investors.

Buying Gold Mining Shares

Investing in mining shares is another way to buy gold in your super fund albeit indirectly. You can buy shares in the gold mining sector just as you would do so with shares in other sectors. The common ways of buying shares include using a broker or brokerage service, buying shares through a prospectus at the initial public offering (IPO) and buying shares offered by employee share scheme; that is if your employer is a company in the gold mining sector.

Buying Gold With Managed Funds

You can also invest in gold by choosing a managed fund that does just that. Most managed funds however invest in cash, fixed interest securities and bonds, mortgages, shares (including ETF?s) and property. Before choosing a managed fund however, you need to be comfortable with its risk exposure and investment timeframe.

The Price History of Gold


The Caveat Of Investing Gold In Your Super Fund

Although investing in gold in your super fund can be a potentially ideal strategy especially in times of economic uncertainty, it is a strategy whose chances of mega gains and mega losses are equally high. Some investors erroneously assume that investment in gold and investment in fixed interest securities are investment strategies that play the same role in an investment portfolio. This is not the case. Investing in fixed interest securities is a strategy that can stabilise an investment portfolio while providing income while investing in gold is a speculative strategy that totally relies on other investors? willingness to pay more tomorrow than they did today.

Investing in gold therefore exposes one to higher risk and hence the need get proper financial advice while maintaining a high standard of investment management to ensure your SMSF remains compliant when buying gold.

Read more about buying gold in Australia here.

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Disclaimer: The information on this site is general in nature and not financial advice. Visitors should consider obtaining independent advice before making any financial decisions.

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