Gold has for a very long time been a much-coveted asset. At some point in time, it was used as a currency in some civilizations. You can read this to learn more about gold’s history. In current times, this precious metal serves as an inflation hedge, and this has made it more coveted by investors globally. Investment advisors often recommend investors diversify their portfolio as much as possible to reduce their general portfolio risk. Hence, more people have turned to precious metals as a means of diversification. However, if you are new to the whole business, then you may be unsure of which path to tread. There are several options available to any investor interested in gold investment. Therefore, in this read, we will be discussing some of the ways you can own an investment with the king of precious metals. Let us get right into it on how to Have Gold Investment.
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This method may very well be the most common or best-known way of owning gold directly. Some persons may imagine bullion to be large bars. This is however not the case as bullion can be any pure (nearly pure) form of gold that is certified for both its purity and weight.
Bars, coins, and so on are regarded as bullion once they fit into these criteria regardless of how big or small they are. The bars often have serial numbers attached to them for security.
Heavy bars are often impressive to see; however, because they are large, they are usually illiquid. This means they cannot be readily or easily sold without the investor recording a significant loss. Hence, buying or selling them can be quite costly.
On the flip side, smaller coins and bars offer more liquidity which makes them the preferred choice by investors. Therefore, this should be your go-to if you choose this method.
For a long time, gold coins are issued in large quantities globally by some sovereign governments. Investors often buy gold coins from reputable dealers.
Some pros of this method of investment include:
- They are usually made to be smaller; hence they are more convenient for investments rather than bigger bars.
- You can find reputable dealers without having to search much as they are in several big cities.
- Their prices can be seen in financial publications globally.
You can check out this Goldmoney review to learn more about buying gold coins. Despite these advantages, caution must be applied before you buy. For instance, rarer and older coins often have “collectors” or numismatic value which is often gold’s underlying value. Hence, you should stick with generally circulated coins when you invest. The rare and older coins should be left for collectors.
The two methods discussed so far make the investor a direct owner of the metal. Hence, other factors like insurance and storage costs would always come to play and this may potentially hinder or reduce profit.
Furthermore, gold’s value will always affect these investments. Meaning, the price in the market will also affect the value of what you hold.
3. Options and Futures
Futures simply mean contracts to either sell or buy a particular amount of the metal on a given futuristic date. This can apply to any other item, but gold is our focus in this read.
They are not traded in shares but in contracts. This method is more fitting for seasoned investors. One reason people opt for this method is that its commissions are relatively low, and they also have much lower margin requirements than conventional equity investments.
They may either settle in the precious metal or dollars. Hence, if this method is chosen, be attentive to the specifications of the contract so you do not start figuring out what to do with the physical metal on the date of the settlement.
Options, on the other hand, are alternatives for futures. With these, the investor can buy future contracts in a particular time frame but at a predetermined price. Visit https://www.cnbc.com/select/a-beginner-explainer-on-trading-options/ to learn more about options. A major advantage of options is that it both leverages the investor’s losses and their initial investment.
4. Mining Companies
A company that is involved with gold’s refining and mining often profit from its rising price. An investor can also choose to invest in these companies. This way, they will profit from the gold market while being shielded from potential risk.
This is possible because big mining companies often have extensive worldwide operations. Hence, other factors other than gold’s price would influence the investment’s success. So, even if gold’s price is declining or flat, the investor still stands a chance of enjoying profits.
When compared with other methods, this is perhaps one of the safest ways of benefitting from gold’s market.
An estimate of 49 percent of gold’s production worldwide goes into making jewelry. Global wealth and population keep growing annually; hence gold’s demand in the jewelry industry will potentially increase with time.
However, buyers of gold jewelry have been known to be price sensitive. When the price increases swiftly, they tend to be less inclined to buy. This may not be among the most profitable methods to invest in gold. It is a rather mediocre approach as even though profit will be made, it may not be that much.
6. Mutual Funds and ETFs
This method is cost-effective and easier than directly owning coins or bars. Small investors can benefit from them because the smallest amount that can be invested is often equivalent to one EFT share. Furthermore, they can be sold or bought like stock in an IRA or brokerage account. You can click here to learn more about IRAs.
Several mutual funds have gold companies and bullion in their portfolio. However, just a few focuses on just gold investing, they mostly own several other commodities. Advantages you will enjoy from mutual funds include:
- Ownership is easy via an IRA or brokerage account.
- Can easily diversify among several companies.
- The minimum investment is low.
In this article, we have discussed some of the methods to have gold investment; from owning its physical form to options and futures, to ETFs, and so on. We believe you have learned some important things from all that we discussed.