If you are looking for an asset-class to put your money into, what naturally comes to mind is investing in stock. You can either buy and hold a stock or trade it. But if you are looking for less volatility, a hedge against inflation and a long-term ROI prospect, your thought should be on how to start investing in gold.
Over time, gold has been known for holding its value, even when there have been cases of financial crises, including the weakened value of the United States Dollar (USD).
Based on this, it is safe to say that investing in gold should be one of your strategies to grow your money. In this article, we recommend some of the best ways to get started with investing in gold.
1. Purchase the Gold Physically
Unlike other financial asset-classes like crypto that are virtual, gold can actually be bought. So, if you are interested in this, consider buying physical gold.
Here are some of the things you need to know before making the purchase.
Buy Gold Bullions
The gold you will physically purchase and hold is called gold bullion. It is so-called because “gold bullion” is a term used to refer to the “investment-grade gold,” that is, the gold that can be bought and held physically.
Buy Gold Jewelry
What is the essence of investing in gold when you cannot use the asset to the maximum? If that is your line of thought, it may be a good idea to buy gold jewelry, which you can wear.
Besides, it is an excellent way to flaunt your wealth and indeed, your possession of one of the most sought-after assets.
Choose the Preferred Gold Bullion
There are different kinds of gold bullions, with the most popular being the gold bar. There are also other variants, such as gold coins and ingots.
Be Particular About Where to Buy Gold Bullions
There are different ways to purchase gold bullions, such as gold bars, gold coins and ingots. You can make the purchase either from a broker or a bank.
Make Plans for Storage
Most times, you wouldn’t be able to keep the gold bullions in your home, either because of security reasons or not being able to keep it in a better condition.
Depending on your location, there are requirements for insurance and safekeeping of the gold bullions.
If that is the case, you have to make plans to spend more money on insurance, security and excellent management of the assets.
2. Purchase Gold Stocks
The interesting thing about gold as an asset is that it can be used for a variety of purposes. You can buy it, trade it or even hold it in a bullion with any of the companies that manage it.
Therefore, if you don’t want to hold physical gold but you want to invest in it, one way to go about it is by purchasing gold stocks. As the name says, you are going about it the way you would have gone about investing in stocks.
But there are some technicalities in buying gold stocks and these have been explained below:
Investing in Gold Companies
Most of the gold stock investments don’t give you access to raw or physical gold. Rather, you are backing or investing in the companies that mine the asset.
For example, you know of a gold-mining company that has remained profitable over the last couple of years. Seeing that the price of gold is a bit high or the risk is much, you want to reduce your risk exposure. You can reduce your risk exposure by investing in the miners, rather than the asset.
By doing this, you are betting on the miners or gold-mining companies to remain profitable and with that in place, you make profits too.
However, the downside to investing in the gold-mining companies is that the Returns on Investment (ROI) depend on the company’s performance. Gold miners with less mining resources and probably internal squabble tend to perform less. They also make less money than another that is not.
3. Buy Gold Funds
This is the third and perhaps, one of the best ways to start investing in gold, albeit, with less risk exposure. Buying gold funds can keep you a step ahead in the gold market, while giving a flexible financial return.
What Are Gold Funds?
Gold funds are also called Gold ETFs or Mutual Funds. As the name signifies, it is a mutually-designed form of gold investment, whereby you are investing alongside others for the same asset.
The upside to gold ETFs or mutual funds is that you get to diversify your risks. Rather than buying and owning a gold bar or any other form of gold bullion, you can instead invest separately.
Besides, you can buy the gold mutual funds from different mutual fund companies or the companies that mine and process gold.
How the Gold Mutual Funds Work
There are different ways that the gold ETFs or mutual funds work. The model depends on what you want.
For example, the popular gold ETFs are the ones that make passive management of the index funds, while tracking the prices of the gold bullions.
There are also gold mutual funds that hold both the gold bullions (physical golds) and the deposit receipts. This type of mutual funds also tends to track the industry trends and the price of the physical/gold bullion.
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Disadvantages to Investing in Gold ETFs
Gold ETFs or mutual funds also come with some investment risks. Below are some of the risks. Evaluate them and see if you still want to go ahead with the investment:
- The gold ETFs might not match up to the physical gold, because they are merely paper backed by either the equity or debt of the mining companies. They can also be backed by the options contracts or futures for the physical gold bullions.
- Some gold mutual funds attract management fees.
Final Words
Investing in gold can be as simple as using mutual funds/ETFs, buying the gold bullions or simply investing in the stocks of the companies that engage in gold mining or trading.
Other gold investment options include using derivatives like futures and options contracts trading. Albeit being one of the riskiest, these can bring steady returns if you are good at speculative trading.
