Digital Gold is a convenient way to gain exposure to the world’s oldest financial asset, without the expense and hassle involved in handling physical bullion. While gold has traditionally been a safe-haven asset, digital gold represents a modern twist on this age-old investment. As with any new investment, it is best to do some work to understand the asset, and give yourself the best chance of a smooth experience. In this article we’ll discuss some key ideas and offer practical tips to ensure you get the most from your digital gold investments.

Why invest in Digital Gold?

Digital gold offers an opportunity to diversify your investment portfolio beyond traditional assets. It is often easier to buy and sell digital gold compared to physical gold, making it a more liquid investment. It is also usually secured by reputable institutions or blockchain technology, reducing the risk of theft or loss. Due to its digital form, the gold is accessible from anywhere with an internet connection, making it an attractive option for a global audience.

Tips for Beginners

Understand the basics of how digital gold works

Digital gold incorporates decentralised blockchain-based protocols that provide trustless verification. This means that you can prove ownership of your assets, and transact with them, without having to use a central counterparty such as a bank, broker or exchange. While it isn’t necessary to be an expert on blockchain or crypto-assets to invest in digital gold, it is helpful to know the basics of the system. Many people are aware of crypto assets because of the popularity of Bitcoin. AtDuBois, we built the digital ledger for our products, which irrevocably records all transactions on the blockchain, on the Ethereum network

Have a strategy and consider how digital gold fits into your portfolio

Determine your investment goals and strategy before diving in. Be clear on whether you are looking for long-term stability or you want to capitalize on short-term market movements.

Gold can be a valuable addition to a portfolio because, unlike stocks and bonds, prices often rise in recessions, inflation or other periods of economic shocks. Traditionally, experts have recommended gold allocations of 5-15% to make the most of this diversifying characteristic. Higher allocations of gold relative to cash-like instruments could be appropriate for those with higher risk tolerance and longer-term objectives. Digital gold offers the opportunity for individual investors to seize the advantages of gold, scaling their commitment gradually, and providing a valuable hedge against economic turbulence.

Start small and take advantage of the low minimum investment

As with any investment, it is wise to start small and gradually increase your exposure as you gain more confidence. One of the greatest advantages of digital gold is that it has low minimum investment amounts and can be bought and sold easily. Physical gold bars are expensive to purchase and can be cumbersome to sell. When buying digital gold, small investments mean that positions can be built gradually over time, perhaps on a regular schedule. This also allows the investor to take advantage of gold price volatility and increase their purchases when prices fall.

Compare digital gold providers by platform quality, user experience and fee schedule

Selecting a reliable platform for buying and managing digital gold is essential. Some key platform capabilities to consider are – an onboarding process that is fast and smooth, 24/7 trading with low transaction costs, and the ability to deposit funds in the currency of your choice. Additionally, the provider should take standard data protection and security steps, such as encryption of all sensitive customer data and segregation of customer funds from the company’s own assets. Fees should be low, simple and transparent. For example, DuBois does not charge holding, transport or storage fees– just a 0.1% fee for on-chain transfers. Different platforms have varying fee structures, including transaction fees, management fees, storage fees and insurance fees. Be aware of these as they can impact your overall returns.

Ensure you choose a high-quality digital wallet to provide secure storage and peace of mind

One of the major advantages of the digital gold products offered by DuBois is that they are self-custody, meaning you don’t have to rely on a broker or custodian to secure your gold. You always have complete control of your assets via a secure, convenient mobile phone-based ‘digital wallet’. Our mobile app DAU Vault allows you to verify your title, send and receive digital assets and see real-time prices. It works with DAU Key, a credit-card sized ‘cold wallet’ which contains a small chip that holds the private key which secures your digital gold more securely than storing your digital gold in a hot wallet online. Both DAU Key and DAU Vault are based on industry-leading security, and together they almost eliminate the risk of fraud or theft, as well as any need to remember or store passwords.

Be aware of how digital gold is taxed in your country

Digital gold is a hybrid asset, with features of both a physical commodity and a digital asset, and this can affect how it is taxed. Your country may tax it as a financial asset, or a crypto-asset, with special taxation arrangements. Relevant taxes to consider are sales taxes (on purchase), and capital gains or income taxes (on sale). In India and the UK, digital gold is treated as an investment asset, with no consumption tax liability, but capital gains subject to tax. Because digital property is a relatively new asset class, it is possible that there will be changes in the tax treatment in the future. Given that many countries are attempting to encourage innovation in digital finance, these are likely to be advantageous to owners of digital assets. For example, in the US, there have been proposals by the Biden Administration via the Responsible Financial Innovation Act to introduce investor-friendly changes to digital asset taxation.

Regularly monitor your investments

It’s important to ensure that your portfolio continues to reflect your investment objectives even as your circumstances, risk appetite and wealth change over time. This will generally happen gradually, but it is worth checking when major life events occur, such as having children, or starting a business. In the short term, as the prices of the assets in your portfolio change, you’ll also need to occasionally increase positions in some assets and sell others to maintain their desired weights in your portfolio.

Conclusion

For many investors, digital gold offers a flexible, secure and affordable way to add gold to their portfolio. But as a relatively recent innovation among financial instruments, it is worth taking the time to understand the nuances of the product and how best to use digital gold to add value in your portfolio. DuBois offers a single point of entry into the world of digital assets. Our service offers a flexible, low risk way to enter the digital gold market, with decades of experience in financial services innovation. We give our customers the confidence to interact with digital assets in a way that ensures they are always in control, with transparency, limited risk and the knowledge to make the right decisions. As with any investment, there are risks involved, so approach with caution, stay informed, and always invest within your means. Happy investing!