All that glitters
A really interesting guest post today from John. Something I haven't really considered myself, although I did enjoy Andrew Craig's book very much. Take it away, John!
"Why buy gold? That's a question best answered by the book How to Own the World by Andrew Craig. The short answer is diversification.
As part of my financial plan, I am investing 10% of my money in gold. Like index funds that allow you to invest in a region or an industry, there are financial products that allow you to invest in gold. I am not doing that. I am buying actual gold and storing it in a bank vault in Switzerland like a pirate king.
To do this I use an online service called BullionVault.com. BullionVault.com is a website that allows you to buy gold and silver and store it (for a fee) in a vault in Zurich, London, New York, Toronto or Singapore. You can choose where. You can also choose to store gold in multiple locations. You can sell your gold at any time and the money will be wired to you the next business day. I chose this particular service because it was recommended in the book How to Own the World and because I can buy Swiss gold in yen without paying a currency conversion fee.
Setting up an online account was easy. They even front you a very small amount of silver so you can try out the trading process. The user interface was straightforward and the website is in English (it's a UK based company). The next step was to fund the account. This is done by bank transfer. My plan was to transfer a lump sum and then use it to make small monthly purchases of gold as a further form of diversification. Their trading fees are extremely low so the number of trades I make matters less than if I were trading in stocks.
An important thing to bear in mind is that all transfers to and from your BullionVault account must be made from the same bank account. This is due to money laundering legislation. I decided to use a basic Japanese bank account that I have for making regular payments.
Transfer fees vary, my bank charged ￥8000. Japan Post would have been much cheaper, but I particularly wanted to use that account.
To make the transfer I needed:
- My zairyu card
- My MyNumber card
- My bank book
- My inkan
- Proof of my address
- Payee's bank details
- Proof of my relationship with the payee
- Proof of the amount payable
BullionVault supplies a link to its bank details which can then be printed out. However your bank will also ask for Bullion Vault's address which is not included on that page. It can be found on the 'Contact Us' page of their website.
Proof of relationship is a little trickier. How do you prove that you want to buy something from a company? A specific amount all the more so. After a little discussion with my bank it was decided that hard copies of emails confirming I had opened an account with Bullion Vault would suffice.
You will also be asked for proof of the origin of the funds you are transferring. Again, this has to do with money laundering legislation. If the account you are using is where you receive your salary then a pay slip will do. If not, it depends on your bank. Due to my contract I receive my salary at a local bank nominated by my employer. In my case, a simple explanation sufficed.
Although it's worth pointing out that my employer was known to the bank clerk I dealt with.
Banks will generally ask you to make this kind of payment between 10:30am and 3:00pm. This is because they don't have their official exchange rate for the day until 10:30am. They will also be unable to tell you how long a payment will take to reach the UK. You can expect somewhere between 3 and 5 working days which could add up to a week or more when time differences, weekends and public holidays are taken into account. The actual process is rather involved.
Expect to spend half an hour or so at the bank. Longer, if like me, your Japanese is poor.
When sending payments to BullionVault you will be asked to include your user name as a reference. You choose your username when you set up your account and it cannot be changed later. So, it's a good idea to choose a name that's comprised of unambiguous characters, not too long and not inappropriate in some way. As a former bank clerk, let me tell you, most things are still done with pen and paper. Make it easy for your clerk and your payment is less likely to go awry.
Once the payment arrives, which in my case took three business days, you'll receive an email from BullionVault. You can then use the website UI to make trades. I found the whole process relatively straightforward. Once you begin making trades, you'll need to validate your account within two weeks. To do this you'll need your banks routing details for receiving payments. You'll also need to upload some photo ID.
Routing (receiving payments from abroad) varies considerably between banks so you'll need to contact yours for the specific details. The site has live chat customer support in multiple languages. I used it to double check that I wouldn't need to pay currency conversion fees for yen in Switzerland and received a reply straight away. All in all I'm very pleased with the service offered by BullionVault so far and I recommend it to anyone looking to buy gold or silver."
Wow, that's really interesting. Thank you so much for taking the time to write this up, John. Love the pirate king image.
As usual, horrible amounts of paperwork and inflexibility from traditional Japanese banks. I wonder if it would be possible to send the funds using TransferWise or GoRemit? Another option would be to use a bank account in one of the host countries (like my one in the UK).
Now, I don't think gold is for everyone. Most people will be fine with low-cost index funds. Only once you have your investments sorted out should you think about more advanced assets like gold, commodities, etc.
If you do end up opening an account, please consider selling the free silver they give you as soon as possible. There is an $8 minimum monthly fee on physical silver deposits.
The minimum monthly fee for physical gold is $4 a month, or an annual rate of 0.12%, whichever is larger. You need around $40,000 to make the $48 a year 0.12%.
Anyone else investing in physical gold or other alternative investments? Any more guest posts out there? Please get in touch, I'm always happy to hear from potential contributors :)