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You want to invest in gold and logically you turn to your banker. Surprise, he’s trying to point you to a house equity fund. Why ? Simply because it no longer sells gold coins and bullion for a long time. Why ? Because this activity is not profitable enough for him… And above all because he prefers to keep your money at home.
Investing in physical gold:
If your bank sold you gold, they would take a commission from you, and then you would walk away with it, and that’s it. In short, it would encourage you to withdraw your money from it, and therefore to “de-bank” part of your assets. No more recurring annual or quarterly fees. No more custody rights. Not enough to make all the services of the bank work … In short, your bank is not going to shoot itself in the foot.Another reason for investment in gold is that it is of great help when in crisis, you can sell gold rather than getting loan. Getting a loan is a difficult, stressful and long process as compared to Cash for Gold which gives you 99% of the actual value.
Your banker doesn’t want to kill the goose that lays the golden eggs
He will prefer to direct you to an equity fund from his bank, because it is an excellent transaction for him. To be convinced of this, just look at the AMF page dedicated to fees charged on savings by mutual funds and SICAVs .
First there will be brokerage commissions and / or entry fees which can range from 0 to 5%, depending on the client. Thereafter, the fund will charge an annual management fee, generally around 1.5% per year. But we often forget the administrative costs, which are deducted from its gross performance each year, for example brokerage fees to buy and sell securities (do we need to specify which bank does the fund use for brokerage?) And then this fund will probably need a custodian bank for the securities, and accounting services, which are very often – surprise – provided by the bank itself and billed to the fund.
This is how we come to the observation of the AMF that the fees on French equity funds are of the order of 1.9% per year. In addition, in certain cases of very active management, the fund may charge performance fees, which are generally 20% of the performance achieved above a predefined level.
A small dose to finish? There will probably still be custody fees, or support costs, for example if it is in the context of life insurance. You have understood it, your bank holds you and punctures you at all levels. And of course, taxes haven’t gone through that yet.
Thus in a fairly conservative simulation , in particular due to low entry fees, the AMF estimated that a French person saving 100 euros per month for 10 years on an equity fund invested in life insurance, with the hypothesis of a gross yield of securities of 6%, received only 2.9% per year, or less than half.
Under similar conditions of return, investing in gold , even with standard commissions for buying and selling gold , turns out to be much more economical and leaves a greater share of the profits to the investor.
To learn more about gold, see the price of gold on our site.