How to Invest in Gold: The Ultimate Guide
Humans have pulled a whopping 197,576 tons of gold from the earth, according to the World Gold Council. Gold has been consistently used as currency and jewelry for millennia, and today, learning how to invest in gold can serve as a safe-haven investment during times of political unrest and periods of inflation.
Thanks to the staying power of gold as a lucrative investment, many investment advisors recommend investing in commodities, such as investing in gold, to lower the client’s investing risk as a whole. There are many benefits of investing, particularly in commodities such as gold.
Read on if you would like to learn more about ways to invest that can help safeguard your financial future.
Getting Started: How to Invest in Gold
If you’re more of a hands-on type who prefers to invest in things that you can see and feel (as opposed to stocks, bonds, or other forms of electronic investment), you may be interested in investing in physical gold. When doing so, you’ll be interacting with gold investment companies that operate apart from traditional brokerages.
The three most widely used types of physical gold investors work with include coins, jewelry, and bouillion.
Investing in Gold Bouillion
If the idea of owning a set of glorious gold bars, secured in a vault to appreciate over time interests you, gold bouillion may be your best bet. They frequently come in bars of one ounce or ten ounces and can be an expensive option depending on how much investment capital you have to work with and the cost of gold at the time.
It’s important to note that if you choose to invest in gold bouillion, you will also need to pay for secure storage and insurance on your investment.
Gold coins, like President Donald Trump Commemorative Coins, can make for an interesting investment in that they are far smaller than gold bouillion, and can therefore require less investment capital. However, unlike gold bouillion, gold coins have varying amounts of demand among investors and collectors alike, so you may have to pay a premium above and beyond the cost of gold the coin itself contains.
Should you want to invest in something you can get some use out of, gold jewelry can be both beautiful and valuable. Investing in gold jewelry poses a few risks that other physical gold investments don’t.
For one, you have to be careful from whom you purchase gold jewelry, as not all sellers are reputable. Authenticity matters, and buying fake or low-quality gold isn’t going to result in the payoff you might be expecting.
Investing in Gold Mining Company Stocks
This may seem like a roundabout way to invest in gold, but investing in the stocks of gold mining companies can pay off. It’s also a bit easier than investing in physical gold. If you already have a brokerage account, you can use it to purchase stock in these companies just like you would in any other one.
The stock value of gold mining companies is influenced by gold prices, but also by more traditional stock-value metrics, including how profitable the company is and what its expenses are. Investing in these companies carries the same risk as investing in any other company’s stock, as well as the risk involved when investing in gold itself.
If you choose to go this route, it’s usually best to have some stock investing knowledge and experience under your belt already or be working with a professional who can provide you expert advice.
ETFs and Mutual Funds
Gold is known to have long-term stability. Investing in Gold ETFs and Mutual Funds offers more liquidity (the ease of selling a security in a secondary market) than trying to sell physical gold bouillion, jewelry, or coins. This means that it’s faster and easier to sell when you want to, making it more likely that you will get the price, and profits, that you’re looking for.
When you invest this way, you aren’t directly buying physical gold, instead, you’re buying a piece of paper that is backed up by debt or equity of gold mining companies themselves, or futures and options contracts for physical gold.
These types of investments don’t necessarily line up value-wise with the price of gold as it is valued on the market, and generally perform differently than when you buy actual gold.
Gold Futures and Options
If you’re familiar with speculative investing, then gold futures and options may provide a profitable investment opportunity. If you’re unfamiliar, futures contracts are an agreement to buy or sell a security for a specific price at a specific date, no matter what the current market conditions are.
Options, on the other hand, give you the option to buy or sell a commodity (gold in this case) if it reaches a certain price on or before a specific date.
To invest in either of these methods will require that you create a broker account with an online broker that offers these choices – most of which do. The benefit of signing up with an online broker is that it allows you to buy and sell directly from their trading platform.
It’s important to note that the majority of online brokers charge a commission based on the number of ETFs and Options that you sell. In order to maximize your profits through this method, you’ll need to factor in the commission your broker will charge for each transaction.
Is a Gold Investment in Your Future?
You have a lot of options when it comes to how to invest in gold, and figuring out the one that’s right for you is of paramount importance. If you want something you can hold and feel in your own two hands, you may want to invest in physical gold, whether it’s bouillion, coins, or jewelry.
Those who have experience in other vehicles of investment, such as stocks, bonds, ETFs, and options may want to stick with what they know best.
To learn more about investing in gold and securing your financial future, check out our blog.