In the current economy when in the position that you are sitting on malleable capital, you want to make the most of it, almost nurture your funds like a garden. Set yourself a mantra to keep the soil fresh and the flowers watered. This is a difficult task in the current market, with inflation looming, restrictions and limitations being consistently marginalized it leaves the savvy investor with little options.
You may ask yourself what should your next move be, when potentially all your previous investments have been solely in dividends, and the short changing of tax free income is something you need to now plan to hedge against. It is understandable that you may feel this is a headless task, however this can be achieved by refocusing your investment opportunities, and start looking into alternative options to diversify your investment portfolio in order to appreciate value.
There is one form of investment which provides a Hedge in a falling economy, and that is gold. Gold is rhapsodized as a hedge against economic uncertainty and inflation. It tends to retain its value over time and act as a physical store of wealth. This year we have seen Gold reach an all-time high of £1647.13 per troy ounce, illuminating its ability to appreciate value and enabling millions of investors to see their investments growth hit an all-time high.
In comparison to holding Dividends, for any readers unaware of what precisely is meant by the term a ‘Dividend’. Dividends are a payment form which a limited company makes to its shareholders from profits after settling the companies corporation tax and usually very strong choice for providing a salary top up. Dividend-paying stocks are typically considered for income generation. They provide regular cash payments to investors.
Now the risk with depending on dividend income, is that any funds earned or accumulated from your initial investment, the actual profits you will receive are solely dependent on if the company decides to pay out at all, companies are well within their rights to slash any payments and are not obliged to distribute any excess funds to you. This risk of withholding, along with the pressures of inflation can very quickly eat into your savings.
These are very abundant weaknesses to be hedging against your potential profits, and is a factor to keep in mind when deciding on the correct investment opportunities for you. In addition to the recent announcement stating the Tax free Dividend allowance for 2023/2024 will now be limited £1000. And is expected to reduce further in 2024/2025 to a mere £500. This narrow margin means that any dividend payments you receive outside of this limitation will have a negative impact on your tax savings.
Reverting to the safe haven asset of physical Gold as your initial investment choice from building tax fees and looming charges on your profits made each year becomes more appealing for the knowledgeable investor.
To break it down and focus on the fundamentals when we look at gold and dividend investments in comparison which is the investment to feed within your portfolios going into 2024, our key focusing going forward are;
Income vs capital appreciation
Gold: ‘Gold’ doesn't generate income by itself. It relies on capital appreciation (an increase in its value over time) for returns.
Dividends: Dividend stocks provide a regular stream of income, which can be appealing for investors seeking cash flow.
Gold: Holding a small portion of your portfolio in ‘Gold’ can provide diversification, as it often moves independently of stocks and bonds.
Dividends: Dividend stocks can also contribute to diversification, but their performance is more closely tied to the overall stock market.
Gold prices can be volatile, and its value is subject to market sentiment, geopolitical events, and supply and demand dynamics.
Dividend-paying stocks can also be volatile but tend to be less risky than individual stocks with no dividends. The stability of dividends depends on the financial health of the companies.
Purchasing ‘Gold’ is often considered an inflation hedge because it tends to hold its value or increase in value during periods of rising prices.
The purchasing power of dividends can erode during times of high inflation unless the dividend income increases to keep pace.
Depending on your jurisdiction, gains from selling ‘Gold’ may be subject to capital gains tax.
Tax treatment of dividends varies, but some countries offer preferential tax rates for qualified dividends.
It is notable that Investing in gold versus buying dividend-paying stocks is a choice that truly depends on an individual's financial goals, risk tolerance, and market outlook. Both options for investment have their advantages and disadvantages, and what might be considered a stronger investment be it physical ‘Gold’ or Shareholder Dividends can vary from person.
The current favouring of turning to bullion to offset your capital and buying gold as a means of inflating your savings, enabling investments to grow without profit limitations when your portfolio is filled with the right investments. A strength for investing in gold against dividends rests against the fact that you can build with bullion. Creating a portfolio that works with you, not against you and how this can be done is simply by learning to invest in items exempt from Capital Gains Tax.
What is CGT?
‘CGT’ is an abbreviation for Capital Gains Tax, This is a tax that is implemented onto any profits made by any individuals sales of non-inventory items, such as stocks, bonds, real estate, property and in this case we are focusing on the most valued items. Precious metals such as gold coins and bars, also known as investment bullion.
What is CGT exempt?
All British gold coins minted by the Royal Mint are Capital Gains Tax (‘CGT’) Free as they are considered legal tender. Additionally all investment gold is VAT Free. Making coins such as the Gold Sovereign and Gold Britannia coins highly favoured by Investors looking to take advantage of ‘Capital Gains Tax Free’ Investments.
What is the current exemption for CGT?
As of today November 21st 2023 capital gains tax allowance is still currently up to £6000.
What will the new ‘CGT’ exemption allowance be?
The current allowance of £6000 will decrease over 50% to £000 this coming April 2024.
What are your options as a bullion investor?
In regards to your purchases come April 2023 and 2024, making the decision to buy ‘CGT’ Free ‘Gold’ from trusted Gold & Bullion Professionals; such as Hatton Garden Metals who are a tried and trusted means of avoiding the unnecessary charges associated with CGT. As all Gold Bullion orders are sent with FREE postage and packaging and our prices are the best you can find online.
It's often advisable to consult with a financial advisor to determine the most suitable investment strategy based on your individual circumstances and objectives.
Once reverting to the safe haven asset of physical gold as your initial investment choice, and moving away from withheld funds or looming charges to devour your profits each year, the knowledgeable investor should also view themselves as a savvy seller looking to make the most returns on their initial investment. To then focus on building a bullion portfolio full of ‘CGT’ Free stock, or as we like to refer to these items, specifically gold coins; as British stock. Small but significant decisions such as alternating your investments from dividends to physical gold, and especially ‘British gold’ completely removes the risk of any charges or unnecessary deductions from the profits you accumulate on your investments.
Making the decision to open your investment portfolio to bullion and building yourself a ‘Golden’ investment opportunity a resolution to your 2024 investments.