SMSFs urged to consider unexpected gold costs

While investing in gold can have diversification benefits for an SMSF portfolio, SMSF practitioners need to ensure their clients consider the often unexpected costs and ongoing fees involved with the asset class, says the Perth Mint.

Speaking to SMSF Adviser, Perth Mint manager of analysis and strategy Bron Suchecki said while gold can be a beneficial asset for an SMSF since it is usually “uncorrelated with other assets”, it is vital SMSF trustees consider the ongoing costs that can impact the investment.

“There’s a couple of different ways of buying gold, and they do come with a lot of costs,” said Mr Suchecki.

“A lot of people buy physical gold, but physical gold has a fabrication charge to turn it into a bar or coin, and that can turn into five per cent which is quite large.”

This initial entry fee can consequently be “a bit of a drag” on an investment in physical gold.

He also noted that having the gold stored with a professional custodian also attracts a storage fee.

“So there’s a fair bit of cost with the physical side so my advice would be to look carefully at that,” he said.

While ETFs are another option for SMSF trustees, they should also be aware these tend to come with an entry and exit fee, and ongoing management fees, Mr Suchecki said.

“[SMSFs] need to look at the entry and exit costs as well as the ongoing annual cost, be that a storage fee, or a management fee – you just want to look to minimise those,” he said.