There’s nothing more exciting than making strategic investment choices. And while precious metals might seem a bit aloof at times, they can be one of the most strategic investments you can make during uncertain economic times. Many investors love gold as an inflation hedge or for portfolio diversification.
Some analysts and wealthy people will recommend having at least 25% of your portfolio as gold, but using it as an inflation hedge only requires about 10%.
Regardless of whether you’ve invested in Gold before or are just now starting to add it to your portfolio, here are four ways to invest in gold today.
Is A Gold Investment Worthwhile?
Investing in gold has the same ups and downs associated with investing in general.
But where gold shines is in its ability to hedge against inflation, effectively retaining its value even as everything else shifts. In times of geopolitical uncertainty (like right now, for instance), gold can maintain its value.
On the downside, it doesn’t actively generate wealth or dividends as a physical investment. Historically speaking, gold has its own fair share of ups and downs.
It had a strong surge for the first part of the 21st century, but declined a bit, then had another large surge during the global covid-19 pandemic.
All told, gold is like any other commodity and is best purchased during times of inflation or rising costs.
Buy Some Bars
A good entry point into physical gold investment is with the humble gold bar.
Gold bars are minted by various mints across the country. When you’re buying gold bars, there are a few important things to keep in mind.
First off, you need to ensure that you’re purchasing from a reputable vendor. The vendor should be fairly well known and have established business practices.
Most quality vendors also offer a buyback program along with reasonable prices. They’re not going to try to reel you in with the slowest price of gold that they can offer. Gold prices should be around the average and shipping if you’re purchasing from an online vendor shouldn’t be super crazy.
It’s also important to know what kind of weight you would like for your gold bars. Most gold bars are measured out in one troy ounces. You might also see figures such as grams or kilograms.
Decide what size/weight of gold that you want to add to your portfolio and be prepared to make your purchase plans accordingly. Ensure there are no issues with the vendor, poor reviews, or shady business practices.
As for the gold itself, genuine gold should pass what’s known as a ping test by making a satisfying pinging sound when you hit it instead of a bud.
Purity is also an important consideration. To be considered investment quality gold, it must be 99.5% pure.
Most vendors who offer physical gold will offer finegold, which is 999/99.9% gold or pure gold, which is known as 9999/99.99% gold.
When you want to buy a pure 1 oz gold bar, be sure to keep your wits about you as you make your purchase.
Invest In Gold Futures
Gold futures are a unique investment opportunity for gold. Gold futures are a type of exchange traded fund that let companies hedge their prices for the future.
In a futures contract, the buyer agrees to take delivery of an amount of gold at a locked in price sometime in the future.
Gold futures have an advantage over physical gold because you don’t actually have to store the gold. But, they can be a bit higher when it comes to opportunity costs.
They trade on the New York Mercantile Exchange and are covered by most reputable brokers. Gold features also offer slightly higher liquidity, providing investors a platform from which to take advantage of certain opportunities as they might arise.
Buy Into A Gold ETF
For some investors, choosing physical gold might prove a bit limiting under some circumstances. After all, holding physical gold does require a modicum of physical space in which to hold your bars and bullion.
A safe or deposit box is nice, but perhaps these investors might be better served with an exchange-traded fund. ETFs, better known as exchange-traded funds, is a simple, convenient means for investing in gold without physically owning it.
Gold ETFs are also easy to sell and exchange. On the other side of the coin, Gold ETFs do have some liquidity issues that can make it difficult to buy and sell at times.
There are also the asset management fees and potential taxes on capital gains one must pay if there’s a high ROI. Non-leveraged ETFs (ETFs that don’t borrow money or use other options to enhance returns) are less risky than leveraged ETFs.
All in all, ETFs offer some flexibility and can be a great place to get started with investing in gold.
Look Into Mining Stocks
Gold is a scarcity, largely because it’s difficult to mine.
Gold mining stocks are a distinctive medium for investing in precious metals.
Gold mining companies have the opportunity to expand their operations and mine for more gold.
This gives their stocks a little bit more of an advantage, especially if the company deals in low-cost operations and has a lot of production life left.
The pace at which the company mines gold is also an important metric for deciding if you should invest in them.
When the stars align, gold mining stocks can outperform physical gold but this isn’t always the case.
That’s why it’s important to be very critical and careful in your selection of mining stocks and know the market factors/speak with your financial advisor before diving into gold mining stocks.