Starter’s Guide to Gold: How to Invest in Gold

by | Aug 26, 2020

Investing in gold isn’t all swimming in pools of gold coins; very little of it is. Finding the best ways to invest in gold will mean learning a lot about how it can become a sensible part of your investment portfolio.

What Makes Gold a Good Investment?

Gold has been a popular currency since it was discovered. In ancient times, it was a deeply alluring metal for its luster, used for everything from jewelry to legal tender. These days a lot of that demand stays the same: 50% of the market for gold goes to jewelry, with the remaining amount being divided between industries, banks, and physical forms, like coins or bullion (gold bars in bulk).

For that reason, investors often view gold as a “safe-haven investment.” Decades — or even centuries — later, gold’s value is essentially the same, even if there is fluctuation over time. Often, the value of gold sees a rise when the value of the dollar drops.

Investing in gold will better protect your money from inflation, keeping it stable when markets rise and fall. Gold is seen as a currency that an investor could fall back on if paper money suddenly lost its value.

Its stability comes from the fact that it’s a commodity that is always in high demand even as it retains its scarcity. Gold is difficult to extract in nature and is typically obtained through mining.

But even in an economic downturn, people are eager to invest in gold for perennials like jewelry. And it’s the panicked investors, buying gold when they’re worried about the economy, who usually drive the price of it higher when the dollar falls.

All of that adds up to making gold a solid investment that feels more removed from drastic shifts in the market like other commodities.

Ways You Can Invest in Gold

Not all gold investing is created equal, even with its relative stability in the market. Among the most common investment strategies (particularly for beginners) are:

Physical Gold: The traditional method that your brain likely flits to when someone says gold. This means purchasing gold bars or coins.

Paper Gold: No, this isn’t the gold leafing on the side of a book. This is also known as a gold exchange-traded fund or a gold ETF. It functions like a mutual fund, where you buy gold stock through a broker, and own more piecemeal (but nonphysical) shares of gold.

Paper gold can also be purchased as part of an IRA package, which can appeal to those who are looking for a cost-effective way to invest in gold or helping smooth out risk from other corners of their retirement account. IRA investments in gold can vary, however. It may be best to speak to an advisor about whether you want your IRA fund to include actual physical gold in your portfolio or an ETF option.

Mining stocks: You can also own gold by investing in mining companies that do the work. Using an ETF or mutual fund, an investor can own part of a company (and potentially differentiate in which metal you are investing).

How to Buy Gold Coins

buying gold coins stock
If the idea of physical gold somewhere in your portfolio brings you comfort, you’re not alone. This is one of the most popular and most accessible ways to invest in gold. So how exactly do you go about buying up gold coins for investment purposes?

The most important thing is to start by doing research. For starters, there are various gold coins available to the average consumer, from all over the world. Each of those is issued by a different mint and contains varying amounts of gold within the coin itself.

Once you know where you want to source your coins, it is technically possible to purchase them from internet distributors. As with any investment opportunity, it pays to be informed about the reputation of whom you are buying from before you fork money over.

If you’re worried about where to start investing gold coins — or hoped for something heftier, like a bar — we can help. Reach out today, and we can help you start your gold investing responsibly by removing the doubt. We have years of experience in the industry and are more than happy to assist you in secure and reliable investment strategies.

How to Use Gold in Your Investing Strategy

A lot of what you hope to achieve with gold will depend on your overall investing strategy. But, diversification may be the key to those who are wondering where to start gold investing. Gold isn’t an alternative to all other investments; it’s a helpful addition to help balance out your portfolio.

Every gold investment method will come with advantages and disadvantages, and it’s worth weighing each of those for yourself. From there, you can better decide how the cons of each will measure up against your overall investment strategy.

Things like bullion, bars, or coins are typically seen as the best way to own physical gold (even better than jewelry). Owning gold outright in these forms provides you more security from the tangible ownership. But they come with many markups along the way and are much harder to liquidate than other methods on this list.

If you’re more interested in assets you can quickly liquidate, ETFs would be a smart route for investment. You can buy gold in smaller, more budget-friendly amounts and easily trade within the market.

However, ETFs usually require more middle-management, which could present a higher risk to your investment. Your gold will also be more subject to the ups and downs of the market than if you were to buy physical gold.

If you were to opt for a gold IRA, you might run into some of the same problems. You’ll also be more directly responsible for making sure your IRA is legit and allows for metal dealers — an advantage or disadvantage, depending on how much control you want to personally wield over your investment.

A gold IRA will also require special expenses, presenting an investor with added costs they might not otherwise pay. A fee for the seller, the retirement account setup, custodian, storage, and cash-out costs will all run you a little extra than you might expect. Understanding whether that’s within your budget is essential when deciding if a gold IRA is the right investment strategy.

If the relative unproductivity of gold doesn’t seem like enough and you want something slightly more aggressive, gold mining stocks are a good choice. Miners are running a business, so investors will see the usual boost from increased production and expansion choices they make. That means stocks may appreciate in a way that even something like physical gold won’t.

That said, leaving the safety of physical gold comes with downsides. If the mining business undergoes challenges (as most businesses do), your portfolio will go with it. Like all other investments in the market, it will depend on what happens to the individual miner in whom you invest.

If you’re still interested in learning more about mining stocks, we can help. We help investors navigate what to know, like the mining costs, existing mine portfolio, and whether you should expand your focus to other metals.

There’s also a variety of options in this space: You can buy stock in streaming and royalty companies, which provide mining companies with cash to buy the gold. Mutual funds can help an investor own a portfolio of various mining companies, thereby insulating them from the swings that come from investing in a single mining company.

Gold certificates may also be a good option for someone looking to invest in gold but not have to house it. Essentially, through notes issued by a company that owns gold, you purchase unallocated gold. Even if there’s no specific gold when you buy it, the company says it will honor purchases made by customers when the time comes.

The downside (as you might expect) is that these certificates are only as trustworthy as the company that deals them. So if this route seems appealing, it’s vital to make sure you or a representative has done thorough research before you move forward.

Gold is like any other commodity in which you can invest: there will be market fluctuations, and its value will go up and down.

Unlike many other commodities, there are thousands of years of interest in gold. You can pretty reliably say that gold will never be worth nothing. And if you do see your gold’s value dip lower than you’d like, take heart: it might mean that the rest of your portfolio is doing better at that moment.

If you’re interested in hearing more about achieving a balanced gold investment plan, we can help. Your investment strategy should be in line with your goals, and our team can assist you in figuring out just how to make that happen.

Reach out to us, and we’ll help you figure out what the best gold investment strategy is for you.

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