4 Ways To Invest In Gold Wisely (A Beginners Guide)
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From precious metals, gold is among the most well-known investment assets.
Investors generally purchase gold as a means of diversifying their risk portfolio, specifically by using futures and options contracts.
In comparison to other precious metals utilized for investment, gold has got the safest home and hedge properties.
Gold continues to be utilized through history as money and has now been a relative standard for money equivalents specific to financial regions or countries around the world, until recent years.
For thousands of years, gold has been the go-to asset for wealth protection in times of crisis.
Investment guru and former hedge fund manager Jim Cramer gives investor valuable advice:”everyone should have ten percent of their money in gold.“
I honestly can’t predict when the next market crash is going to take place, but it certainly looks like we are heading towards a severe devaluation and destabilization of the dollar as well as stock market crash at some point in the near future, especially the US-China Trade War Row!
Why Invest in Gold?
Gold prices are currently trading near a six-year high as recession fears are prompting investors to jump into safe-haven assets and flee equity markets.
Analyst predicts the threat of a global recession due to the ongoing trade war between the US and China will continue to keep a bid under gold; however, they added that global monetary policy easing is what will drive prices high.
With the bull market for gold continuing, one European precious metals firm is increasing its long term forecast for gold price.
For many investors, holding a portion of their savings in physical gold is like taking out an insurance policy on their retirement.
Since gold was first discovered tens of thousands of years ago it has held a strong purchasing power and value.
Let’s consider this scenario: if a company goes out of business, it’s stock could potentially be zero and if you as an investor held a large portion of this stock, you could be left with nothing.
But, if we look at the physical gold, on the other hand, it will and has never been valued as “zero” and can never “go out of business.”
Gold Allocation Strategies
Since precious metals are considered as part of the foundation of a portfolio, it’s advisable to allocate a small percentage of your net worth in gold.
Many high net worth investors have been openly sharing their gold allocation strategies.
What Kind of Gold Investments Can I Make?
So, here are the 4 Ways To Invest in Gold Wisely –
1. Invest in Gold Bullion
The cost of gold bullion is set almost entirely by the selling price of gold at the time of the order.
Gold bullion is available in one of the following two varieties –
- Gold Bars: These are generally larger pieces of gold which are generally bought by global companies and businesses.
- Gold Coins: Gold coins are purchased in several forms ranging from 1/10 ounce to 1 kilo; although one-ounce gold coins are probably the most well known between small companies and independent investors. To name a few of the popular gold coins are American Eagle, Australian Kangaroo/Nugget, Canadian Maple Leaf, etc.
Gold Investment Tip: Whenever you buy gold coins or bullion, avoid big premiums. You want to buy gold as close to the spot price as possible, or a 10% premium at the most. The higher the premium, the higher the gold price will have to rise in order to profit.
2. Jewelry and Numismatic Gold Coins with Aesthetic Value
Buying gold jewelry and gold coins are practiced in several Asian countries, like India, China, etc.
Within a bull marketplace, this means the cost of these products shall commonly increase quicker and often exceed the marketplace value of gold.
3. Start Investing in Gold Mining Stocks and Shares
Upon purchasing gold stocks you are not buying gold, but you are rather buying a share in the gold mining business enterprise.
This is a risky way to invest in gold.
Gold miners are risky because they trade with the broad equity market.
Tip: When picking gold stocks try to find companies with strong production and reserve growth.
Sadly, many investors make the mistake of buying the small gold miners that are in the exploration phase with no cash flow.
It’s like buying a lottery ticket with fewer chances of a success rate ratio.
4. Gold ETFs
Gold Exchange Traded Funds (ETF’s) also called Closed-End Funds and Exchange Traded Notes are items that usually try to track the cost of gold and are exchanged on major stock trading exchanges.
Every Gold, ETF, CEF, and ETN is usually set-up and organized differently.
Gold ETFs have gained a lot of significance over the last decade.
So, what are Gold ETFs?
A Gold ETF is an instrument that is based on gold price or invests in gold bullion.
It is traded in major stock exchanges and Gold ETFs track gold bullion performance.
When the price of gold moves up, the value of the exchange-traded fund also rises and when gold prices go down, the ETF loses its value.
Why invest in Gold ETFs?
Well, to start with Gold ETFs are safer to store and less expensive in comparison.
Gold ETFs are inexpensive and are standardized as opposed to jewelry or non-BIS market gold.
Resource Article: Top 9 Gold ETFs: Know what they are and How to Invest in them
To Wrap Up…
Investing in a precious metal like gold is a preventive measure that everyone should put high on their list of priorities, even in an ideal world.
Unfortunately, the global economy is far from ideal at the moment, with all three of the world’s top economies (US, EU, and China) carrying massive debt burdens that are only growing worse day-by-day.
This is the right time to invest in gold.
I usually don’t cover much of the financial topics on my blog, but you can consider investing in gold as a long-term passive income strategy.
Let me know your thoughts or suggestions in the comments below.
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