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Monday, December 4, 2023

Are fractional gold coins worth it?

Gold has been a symbol of wealth and security for centuries, and it remains a popular investment option today for investors who are looking to diversify their portfolios. And, while purchasing full-sized gold coins or bars is a traditional approach to gold investing, buying fractional gold coins has gained traction in recent years.

Fractional gold refers to a category of gold bullion that is divided into smaller, more affordable denominations, typically less than a full ounce in weight. Unlike traditional gold coins or bars, which are often sold as full ounces, fractional gold coins are minted in smaller sizes, such as 1/10th, 1/4th or 1/2th ounces.

These coins contain the same quality and purity of gold as their larger counterparts but allow investors to purchase smaller, more manageable quantities of gold. But are fractional gold coins worth it for investors?

Learn more about the benefits of gold investing here.

Are fractional gold coins worth it?

When deciding whether it makes sense to invest in fractional coins, it can help to weigh the pros and cons to learn whether it makes sense for your investing goals.

Pros of buying fractional gold coins

Some of the potential benefits of buying fractional gold coins include:

Affordability and accessibility

Fractional gold coins allow investors to start small. You can purchase a fraction of an ounce, making it more accessible to those with limited budgets. That lower initial investment requirement makes gold ownership possible for a broader range of people.

Liquidity

Fractional gold coins are more liquid than larger gold bars or full-sized coins. You can sell a portion of your gold holdings without needing to sell an entire coin, which can be especially advantageous if there’s an urgent need for liquidity.

Diversification

Fractional gold coins also provide an effective way to diversify your investment portfolio. They offer exposure to the price movements of gold without going all-in on a single asset class, which can make them a good option for newer or more hesitant investors.

Gifting and inheritance

Smaller gold coins are ideal for gifting or passing wealth to the next generation. They are easier to divide among heirs and can be an excellent way to introduce children to the concept of investing.

Portability and storage

Fractional gold coins are compact and easy to store. They can be safely kept at home in a secure location or stored in a safety deposit box, requiring less space compared to larger gold bars — and potentially lower costs for storage.

Find out more about your gold investment options here.

Cons of buying fractional gold coins

The potential downsides of fractional gold coins may include:

Premium costs

Fractional gold coins often come with higher premiums compared to larger gold bars or full-sized coins. These premiums can erode your potential gains over time, so fractional gold coins may not be the best strategy for someone who plans to put a lot of money into gold.

Limited selection

There is a more limited selection of fractional gold coins available compared to larger gold investing options. You may have to settle for specific designs or mints if you take this route.

Selling challenges

Selling fractional gold coins can be more complicated than selling full-sized coins or bars. Buyers might be hesitant to purchase smaller quantities, making the selling process less straightforward.

Investment grade

Some investors prefer larger gold bars or bullion coins, which are considered more suitable for investment purposes. Fractional gold coins may be seen as collectibles, potentially impacting their resale value.

Tax implications

Depending on your location, fractional gold coins may have different tax treatment than larger gold bullion. So, you should be sure to understand the tax implications in your jurisdiction before you decide to invest in this type of gold.

The bottom line

Fractional gold coins can be a valuable addition to your investment portfolio, offering affordability, accessibility and diversification benefits. They provide an entry point into the world of precious metals without requiring a significant upfront investment. However, it’s essential to consider the higher premiums, potential limited selection and resale challenges when deciding if fractional gold coins align with your financial goals.

And, as with any investment, careful research and consideration of your individual circumstances are crucial. But whether you choose fractional gold coins or larger bullion, gold can be a valuable hedge against economic uncertainty and a way to preserve and grow your wealth over time.

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