Summary: If you want to learn all the basics of how to invest in gold, then I'm here for you. Gold is a great investment. It has been for thousands of years, and it will continue to be in the future. I can help you understand all the details and guide you through each process so that it's easy for you to learn and get started!
In today's society, gold is still highly sought after and valued for its rarity. Gold has been a part of human history since ancient times and many people are looking to capitalize on this historical truth by investing in the precious metal or services related to it.
For centuries, gold has been the most valuable commodity in all of human history, as it was an integral part our societies at least as far back as civilization began with humans (and even more so once we became largely reliant upon money). Nowadays there are lots of opportunities available that can help you take advantage of this reality - both through buying physical bullion like coins or bars but also businesses focused around everything from jewellery design to importing consumers electronics - that makes owning some type gold.
I've been investing in the stock market and precious metals for over 11 years now, and I try to relay as much knowledge as I can into these posts.
By the end of this article, you're going to learn:
- 6 Common & Popular Ways to Invest in Gold
- 3 of these 6 ways I actually recommend
- How To Get Started Today, even if you've never invested a dime in your life
How to Invest in Gold 101 - A Newbies Guide
Gold is a commodity that has been highly profitable for investors over the centuries. It's also one of the few commodities to have survived and flourished in an age dominated by technology because it's so versatile.
Gold can be bought, sold, traded, or utilized in several other ways to earn you a hefty profit--but sadly not many people are aware of this!
In order to expand your investment portfolio and take advantage of all the ways gold can make you money, you need to know how it works.
Below are some basic facts about investing in gold that will get you started off on the right foot.
Gold & Precious Metals IRA (#1 Recommendation for Retirement Savings)
Do you want to protect your investments from inflation?
If so, then you may want to consider placing precious metal assets in your individual retirement account (IRA). In fact, many individuals just like you are building their nest egg with a Self-Directed IRA.
This type of account is especially beneficial for those who want to invest for their retirement, but do not have the time and knowledge to research on their own.
Recommendation: Store Your Gold Safely WITH a Gold IRA with Goldco.
Many people today recognize how difficult it can be trying to build up enough money for retirement without help - even if one has all of the will power possible within themselves - which is why many turn towards self-directing IRAs as well.
A lot of folks know about 401k plans but may not realize this lesser known option exists.
A gold IRA is an account where physical gold or other approved precious metals are held in custody for the benefit of you who own it.
You can choose to have your money be used as a form of retirement savings, and with this type of investment any gains will not be taxed until after they're withdrawn from the account when at least 59 1/2 years old.
It acts similar to a Traditional IRA, only instead of holding paper assets, it holds physical precious metals (stored in a secure vault).
So, you get the benefits of holding gold bullion, without all the inherited risks, such as knowing where to store it etc.
Goldco is who I recommend for this, they help their customers transfer their retirement investments into Gold & Silver IRA's, which can be great for a long term investment. Our #2 choice would be Augusta Precious Metals.But back to Goldco, they're one of the top trusted Gold IRA companies in the USA. They've got a 5 Star Rating on Trust Pilot as well as an A+ Rating with the BBB, which is why I do recommend them.
To learn more about Goldco, see my review here: Goldco Review (Gold & Precious Metal IRA’s)
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Gold Bullions and Coinage
Gold bullion are an interesting way to own gold. You can buy them in bars, coins and even jewelry! They come with serial numbers on the surface for security purposes.
Bullion is a coin or bar of pure gold that has been certified by weight, purity, and sometimes authenticity as well such as if it's real or fake etc.. It might also have a stamp with its engraving number so you know where it came from at all times which makes these very safe forms of ownership over time because they're hard to counterfeit without people knowing about it beforehand.
Though the common conception people have for gold bullions is that they take the form of large gold bars, they are usually sold in much smaller sizes or take the form of coinage - usually minted and sold by sovereign governments around the world.
This is for the obvious reason that large gold bars are simply impractical to possess. Their very nature makes them hard to sell as you cannot sell anything less than the entire bar.
Older coinage or coinage that is exceptionally rare are usually treated as numismatic - they are priced at the collector's value rather than their worth in current gold rates.
Pros & Cons of Owning Gold Bullions/Bars/Coins
Pros
Cons
Gold Exchange-Traded Funds
An alternative option to direct ownership of gold is the investment of gold through gold-traded funds. Gold-traded funds operate the same essentially as stocks do - you buy a small fixed amount of gold in the form of a share which can be sold just like stocks can in most brokerages.
This method has the perks of being less risky than owning the gold upfront and is friendlier to small-time investors looking for something easy and somewhat dependable to put their money in. The fees incurred by an ETF are also considerably lower than most other types of gold investments.
If you are one of these small-time investors simply looking for an investment to make your limited funds work for you, an ETF is certainly one that should be added to the portfolio. That being said, the amount likely to be earned from these forms of investment might not be enough for the more voracious of investors.
Related: Gold ETF vs Physical Gold: Which is Better?
Gold Mutual Funds
In the simplest of terms, Mutual funds are a type of investment that is managed by an external company.
Essentially, the investors put their money together to make one big fund and the management decides how it will be invested for them, giving back profits in dividends as they do well with the investments. Some other types of investments can include gold bullions or companies and these have proved popular options because many people don't feel like directly handling buying gold themselves. These low-cost plans also often require smaller minimums from each investor so they may provide some nice safety nets when you're looking into more risky forms of investing such as stocks where there's no guarantee what might happen down the line if your stock market takes a hit.
Generally speaking, mutual funds are particularly a strong choice because they're known for only carrying low risk in addition to providing excellent returns.
Gold offers something that other investment types can't necessarily match up with and that is universal appeal.
Gold is valuable anywhere you go on Earth so these investments carry some truly diverse appeal. Gold can also provide some smart diversification and it may be an option for those who don't feel like taking things too far when they're looking for investments outside of stocks or bonds which most financial professionals will usually advise against putting your eggs into one basket if you want to stay safe.
Investing in Gold and other precious metals is generally seen as a conservative investment, but there are still a number of ways to invest in gold and shares of Gold mutual funds may be just another way to go for some people who want to get involved with Gold investments without going full blown Gold mining .
Gold Futures and Options
A gold futures contract is a contract to buy or sell gold at a future time and a predetermined weight and amount. Whereas the ETFs offer you're to buy gold shares, contracts are what's bought and sold with this form of gold investment.
These are more suited for experienced investors who are looking for a higher-paying investment with a very low commission.
Options, on the other hand, are different because they give the owner the right to buy future contracts within a pre-set time frame and a pre-set price. Investors do this to leverage the original investment as well as mitigate any losses on the price paid. Fairly complicated for the inexperienced individual without proper research.
When investing a large sum in gold, Future Contracts and Options are the cheapest and probably most ideal ways to do it. Through engaging in such agreements, they require attention to the details of the agreement and the willingness to accept the increased risk.
With investing in gold through futures and options, there are numerous things to consider other than the price of the precious metal.
- First is your investment time frame; if investing for other than pure speculation, it's important that you have a plan of action as well as goals for how long your investment will last. Depending on where and when gold prices go up or down determines how much money you make with such investments.
- There are also delivery dates that have to be considered; most contracts can be bought without requiring delivery unless otherwise stated in the terms and conditions. It's best to avoid the ones that require an automatic delivery because you may not end up making any profit just buying such a contract.
Several factors determine how profitable investing in gold futures & options are. The most important factor is the price of gold as well as what an investor pays for a contract. If investing in futures, you might also have to pay a fee for investing depending on where you decide to invest your money.
When investing, there's a good chance that the market price and delivery date will fall outside of your favor but investing through options can minimize or cancel out losses caused by this situation. As with investing in any other form of assets, make sure you're aware of all information required before investing in gold futures and options so you can gain maximum profit from it.
Other Forms of Gold Investment
Though those were the main and most common forms of gold investments that investors engage in, no discussion of the forms of gold investment is complete without taking at these simple but effective methods:
Gold Mining Companies
Gold mining companies benefit just as much from the rising prices of gold as financial institution do. These usually multi-national companies continue to post record number of profits every year especially seeing as gold only seem to be getting rarer and rare.
That means they post profits even when gold prices are low. Investing your money in shares of a gold mining company can be as good as if you had invested in the gold itself. That being, investment in a gold mining company, or any company for that matter, requires due diligence on the part of the investor.
That means putting the time and effort into researching these companies properly before committing your money to them. If you find giving the mining company background check too time-consuming, perhaps your money is better suited in a less attention-demanding investment like mutual funds or ETFs.
That means putting the time and effort into researching these companies properly before committing your money to them. If you find giving the mining company background check too time-consuming, perhaps your money is better suited in a less attention-demanding investment like mutual funds or ETFs.
As far as investing in gold mining companies go, however, investing in small cap companies may be the best bet. Investing in large companies will only make you lose out on a significant portion of your money to the financial institution.
Investing in a smaller company is also less risky because if it folds up, it does not really change much for the institutions which are investing heavily in them anyway. The same cannot be said about investing in some well-established and very successful gold mining company. If they fold up, all your investment is gone that's why investing aggressively in these large corporations or investing at all might be too risky for most people.
These mining companies are also the ones that will give you the highest ROI. These companies may be a bit smaller than investing in some big company but they usually have much higher returns for the investor.
The best thing about investing your money into these gems (pun not intended) is that there is always something new being discovered every day by geologists and prospectors looking for the next big gold mine in their backyard. Gold mining companies are investing money into countries that may be politically unstable, but as long as you can read their financial statements and know something about their background, investing in these smaller stocks only appear to have more upside potentials than larger caps or investing solely on the gold market.
Jewelry
With 49% of the world's gold going into the manufacturing of jewelry, it would make sense to think that simply purchasing gold in the form of jewelry is an easy enough way to procure gold as an investment - maybe along the same line as bullions.
This, however, is not the case. Firstly, not every article of jewelry contains the same amount of pure, unadulterated gold. The karatage varies from item to item and sometimes the amount of gold is too menial to consider as a legitimate investment.
Gold jewelry has always been seen as valuable because people believe they will never lose their money with this type of investment, but often times they do if the items are not properly inspected beforehand. If you want to invest in precious metals then make sure you purchase bullions or bars instead!
Also, when buying gold in the form of jewelry, you are not just paying for the gold but the craftsmanship, the brand name, and the retailer's markup as well. This means purchasing gold from retailers can be up to 400% more expensive than buying the pure gold itself.
Unless inherited, jewelry is simply far too expensive to attain to be considered a good investment. It might take decades for you to be able to sell your gold at a profit and by then, it will be worth more due to its status as a collector's item than its worth as a piece of gold.
For example, a simple 14 karat gold chain - which would be 92.35% pure or more - is not worth investing in as it can easily fetch about $500 on the open market when purchased from reputable sellers. The same goes for an 18K gold watch that may contain less than 90% of pure metal and might even have some non-gold alloy mixed into its composition to cut costs.
As with anything, it's important that you do your research before making any type of investment. And if investing in gold jewelry is what you're interested in then make sure the karatage on each item is enough for a return! Just because something looks good does not mean it will be worth more than its weight in gold. You don't want to spend money only to find out later down the line that there was less gold inside the metal all along, which means your purchase won't have been worthwhile after all.
In Conclusion
Though there are risks involved, gold remains a fairly dependable and predictable commodity to invest in. Probably more so than any other form of investment because you are essentially bidding on an element that is known for being highly rare.
That being said, if you are looking for the form of gold investment that is minimal in risk, Gold IRA's, ETFs and Mutual Funds are perfect for medium to long-term investment plans.
Investment in gold mining companies is relatively safe and easy if you take enough time to do your homework. Any other form will require a bit more research and experience to manage effectively.
Though you might be tempted to own gold bullions outright, know that comes with a whole lot more consideration with keeping them safe and insured.
Finally, know why you are investing in the first place. Decide if it is simply to make a little more money on the side or are you trying to start a fund for something costly in the future? Knowing this will also give you an idea of what risks you are willing to take when making investments.
