6 Ways to Invest in Gold
There is something exciting and exotic about owning gold. Gold has been a standard form of currency for a very long time. Gold can provide protection against inflation and many financial advisors recommend owning some gold in your portfolio. Invest In Gold is something every should have knowledge on.
There are several ways to invest in gold; some of them are direct, like owning gold bars. Others are indirect, like owning stock in a gold mine.
Let’s look at your options:
1. Gold Bullion: While most people think of gold bars, the term ‘gold bullion’ applies to any pure or nearly pure gold with a certified weight and purity. Smaller bars and coins are more practical for most people. One large gold bar worth $250,000 isn’t easy to chop in pieces if you need some of that money now.
• Dealers can sell gold coins and smaller bars at a premium of 1 to 3% on the value of the gold they contain. The values of coins are easy to determine in the financial marketplace and dealers are easy to find in decent sized cities.
• However, insurance and storage costs could use up part of your investment funds, so it’s a good idea to consider these fees when looking at the feasibility of investing in gold coins.
• Common gold coins include the South African Krugerrand, the Canadian maple leaf, and the U.S. eagle coins.
2. Exchange Traded Funds: This is the easiest way to own gold, since you don’t have to store or insure it. One share of an ETF is equivalent to a specific amount of gold, frequently a fraction of an ounce. Just like any other mutual fund share or share of stock, investors can buy and sell these shares.
• The annual expense of owning these shares is quite low; usually less than 0.5% annually; this is better than the expense ratio of most mutual funds.
3. Mutual Funds: There are many mutual funds that own gold in some form, but there are relatively few that invest in gold exclusively. Most of these funds invest vertically in gold related businesses. This means they invest in gold bullion, the mines and other related real estate, the mining companies, distribution, and more.
4. Futures and Options: These provide a vehicle to bet on the future price of gold. You can purchase the right to buy or sell gold at a predetermined price within a predetermined span of time into the future. This type of investing in gold can carry a high risk and involve complex techniques, so be sure to research strategies before you commit.
5. Gold Mining Companies: Many gold mining companies issue stock just like other publicly traded companies. These can be found on the various stock exchanges. As with any stock, doing your homework on the company you’re investing in is critical.
• Keep in mind that there is always a surplus of gold in the world; the actual commercial demand is very low relative the supply. The value of gold is almost entirely dependent on investor sentiment.
6. Jewelry: This is a very difficult way to invest in gold, as the value of the jewelry is often much greater than the underlying value of the gold in the jewelry. In general, the only person making money on gold jewelry is the jewelry shop owner.
There are many options to invest in gold. Bullion can make sense for larger investors with the ability to store and insure that gold. The average person that wants exposure to the price of gold would be better served by owning shares in an ETF or gold-related mutual fund.
Those with an aggressive stream can look into options and futures. Owning stock in gold companies themselves is another option if you have the time to do the research.
Each of these options could work for you, depending on your situation. If you want to invest in gold, your best option is really to choose the vehicle that works best for your investment needs.