Gold is a valuable asset that can help protect your portfolio against volatility and is a valuable component of any risk-adjusted portfolio.
Whether you’re new to investing or have been at it for years, investing in gold can be intimidating. You may be wondering how to get started buying gold. This article will walk you through the process from start to finish, so you can start investing in gold today.
How To Buy Gold
Gold is one of the most precious metals in the world. It has been used as currency and a store of wealth for thousands of years. For novice gold investors, the options available can be overwhelming. Buying gold is not as easy or straightforward as it seems, so it’s important to have all the information you need before making a purchase.
Take a moment to imagine what investing in gold looks like. Owning physical gold is likely the first thing to come to mind. Maybe you’re imagining stacks of gold bars, unique or collectible gold coins, or even fine gold jewelry laden with stones or intricate patterns. Each of these options is an investment (on top of an aesthetically pleasing purchase,) and they all carry unique pros and cons.
Physical gold bullion, or gold bars, is one of the most popular ways to buy physical gold. Gold bullion bars are available in various sizes up to 400 ounces, but the most common investment options are the one and 10 oz bars. As you can imagine, buying gold can be quite expensive, so you must purchase yours from a reputable dealer. You’ll also need to invest in adequate storage, either in a vast vault or a safe deposit box.
If you choose to invest in gold bullion, it’s also a good idea to keep up with gold prices so you can buy at the proper time—most dealers change their prices depending on current spot prices.
Several different types of coins are available, each with its distinct purpose.
Bullion coins are precious metal coins frequently used as payment for goods and services. They can be purchased as collectibles or as investments. The Royal Canadian Mint issues bullion coins as part of its animal series.
Proof coins are superior to bullion gold coins in terms of quality. They are produced in small quantities and feature high-quality strikes, making them an excellent choice for collectors. Proof blanks are specially treated, hand-polished, and cleaned to ensure high-quality strikes.
Numismatic gold coins are older coins that have gained value among collectors due to their precious metal content and artistic or collector’s value. Numismatic coins must be independently certified by third-party grading services.
There are also semi-numismatic gold coins available on the market, combining the traits of gold bullion coins with numismatic coins.
Gold jewelry is another great investment option. It can be worn or stored, so you get the added benefit of enjoying your jewelry while also knowing that it’s contributing to your financial stability.
Jewelry is a riskier investment than physical gold, gold stocks, or other gold securities because numerous factors influence its value. Gold jewelry gets its value from raw materials, like gold, and its historical value, aesthetics, and the labor invested in its creation.
Authenticity is essential when it comes to buying gold jewelry. Be conscious of the purity of your jewelry or the percentage of gold it contains. Gold purity is measured in karats, with 24 karats representing 100% pure gold. Lower purity reduces your piece’s melt value.
Gold securities are tradable financial assets that investors can buy and sell as they would any other stock or bond. They offer a convenient way for investors to invest in gold without dealing with the hassle of sourcing and storing physical gold.
Gold securities are also more straightforward trading options than physical gold, which can be challenging to buy and sell in large quantities. Plus, they’re more liquid than physical gold, allowing investors to make smaller trades without worrying about moving into and out of storage.
If you’re looking for a way to invest in gold, you might consider investing in gold stocks.
These are shares in gold that an individual owns in a gold company like a mining corporation. Gold companies can potentially generate higher total returns than physical gold investments. That’s because these companies can expand their production and reduce costs. These factors can enable gold mining companies to increase their profits, enabling their stock prices to outperform the price of gold.
Some of the top stocks in the gold market that elite investors are using to profit from this gold boom include:
- Newmont Mining Corp. (NEM): Newmont Mining Corporation, headquartered in Colorado, is the world’s largest gold mining business. It has mines in both North and South America, as well as in Africa.
- The Barrick Gold Corp. (GOLD): This gold mining company is based in Toronto and operates in 13 countries worldwide.
- The Franco-Nevada Corp. (FNV): Franco-Nevada owns no gold mines. Instead, it purchases royalties from other gold miners.
Gold ETFs and Gold Mutual Funds
Gold ETFs and mutual funds are two ways to buy gold. They both offer you exposure to the long-term stability of gold, but they differ in how they do so.
Gold ETFs are commodity ETFs that hold only one principal asset: gold. Exchange-traded funds act like individual stocks, and they trade on an exchange similarly. However, they hold gold derivative contracts backed by gold—so if you invest in a gold ETF, you won’t own any physical gold.
Gold mutual funds are investment vehicles directly or indirectly in gold reserves. You can choose between those that invest in shares of companies involved with the production or distribution of physical gold or those that invest in stocks of gold mining companies. Many gold funds also choose to invest in a variety of securities, like gold mining stocks, physical gold, and gold futures.
Futures and Options
Gold futures and options are derivatives, meaning their value is wholly determined by the cost of an underlying asset—in this case—gold.
To invest in futures or options, you must open an account with an online broker selling these products. Once you’ve established a brokerage account, you can buy and sell options and futures directly through the platform. Most platforms charge a commission for all trades, depending on the quantity of contracts purchased or sold.
How to Invest in Gold as a Retail Investor
If you’re a retail investor who wants to invest in gold, there are several ways you can go about it. You should first assess what assets you already own, like gold jewelry or old coins, and get them appraised. Once you’ve determined the value of your existing assets, you can figure out how much more you’ll need to invest to achieve your ideal portfolio balance.
Next, you can start by buying gold mining stocks and trading gold ETFs or gold funds through your existing online brokerage account. This is by far the easiest (and most accessible) method of investing in gold.
Buying gold securities is often the preferred method of investing in gold because of its simplicity. You can purchase and trade gold funds if you know how to buy and trade stocks!
Where to Buy Physical Gold
If you want to invest in something like gold bullion or gold coins., you can find a qualified retailer in your area. Buying physical gold can be a wise investment, but it is important to know where you’re getting it from and what you’re paying.
When buying gold bars, make sure you’re purchasing from a reputable dealer and minter like the Royal Canadian Mint, Perth Mint, or Valcambi. Reputable retail websites include the American Precious Metals Exchange (APMEX), JM Bullion, and Wholesale Coins Direct.
Before purchasing, buyers should research reputable dealers and check the bars’ purity, form, size, and weight. Research websites such as the Better Business Bureau and Ripoff Report to learn more about a gold seller’s reputation. Finally, be aware that purchasing gold bars comes with extra costs, including storage, insurance and a sales markup.
The Right Portfolio Allocation
Most estimates suggest that gold investments should make up only 5-10% of your portfolio and not more. This will ensure that your portfolio has room for other investments like mutual funds, stocks, P2P lending, etc.
However, gold has low returns, is usually illiquid, and is quite expensive to get into, so keep in mind that if you’re looking for an investment that will generate instant income, gold is not the asset class for you. Instead, gold provides a hedge against inflation and is an integral part of a risk-balanced portfolio.
The Best Gold Investment Option
If you’re looking for the best gold investment option, there are a few things to keep in mind.
First, you need to know what kind of investor you are and what your goals are. Are you looking to make a quick buck, or do you want something that will last? How much money do you have to invest? Do you want to go with something that will provide liquidity or something more long-term? You can get some great advice from a financial advisor, but ultimately it’s up to you!
Secondly, gold is not a highly liquid asset—meaning it cannot be easily exchanged for cash. Investments in securities like gold futures or gold funds are not meant to be highly liquid, so if that’s what you’re looking for, then maybe investing in something else would be better for your needs. The purpose of investing in gold is to stabilize a portfolio, adjust for risk, and maintain a hedge against inflation, so the right investment option is the one that makes sense for YOU.
Investors often opt for equities like gold mining stocks or gold ETFs since they are available on most online brokerages and require no storage costs (which can add up over time).
The best gold investment option is the one that makes you feel secure. If you’re looking to add a bit more stability to your portfolio but aren’t sure where to start, Hedgeful is here to help. We use gold securities to adjust your portfolio for risk and increase your financial stability.