What's the Safest Way to Invest in Gold?
September 22, 2021 (Investorideas.com Newswire) What's the first thing that comes to your mind when you think about investing in gold? If you're like most people, your mind has already conjured visuals of a ton of gold bars stacked inside a bank vault.
But buying gold bars and coins isn't the only way to invest in gold. There are various gold investment options available in the market that offer better returns and liquidity. From ETFs and mutual funds to mining company stocks and futures - there are plenty of ways to invest in gold.
In this blog, we'll delve deeper into a few of the safest ways to invest in gold. But we'll first understand why there's such hype about investing in gold. Let's get started.
In Gold We Invest - But Why?
Gold has been the asset of choice for investors for several decades. It isn't surprising considering that prices of the precious metal have continued to rise in the past. Gold has managed to retain and amplify its store of value, even during periods of economic crisis and recession.
That makes it a wise investment for hedging against inflation. Moreover, investing in gold has historically yielded higher returns.
But it isn't the only reason why investing in gold is such a great idea.
Here's the thing - gold shares a low correlation with other financial instruments, such as stocks and bonds. That means when the value of stocks and bonds goes down, the value of gold typically experiences an uptick. It's the reason many investors turn to gold during times of geopolitical crisis and economic downturn.
That, in turn, escalates gold prices even further, making it a wise investment even when the economy is slow.
Moreover, investing in gold is a great way to diversify your portfolio. That's because gold assets perform differently from other securities. Adding gold to your investment portfolio ensures that you continue to earn high returns despite an inflation spike or recession.
But not all gold equities are created equal. If you want to maximize your earnings from gold, you must closely monitor the price of gold and choose the right investment strategies. It's a good idea to follow a trusted portal, such as Reliable Gold Investment, for the latest news and advice on gold investments.
Before delving deeper, let's identify the drawbacks and risks associated with traditional ways of investing in gold.
The Problem With Buying Gold
Before the advent of securities, such as stocks, ETFs, and mutual funds, buying gold bullion used to be the standard way of investing in gold. You can buy gold bars or coins from a dealer, and sell them at a suitable price in the future. You can also purchase gold bullion at estate sales and auctions.
The biggest drawback associated with this technique is that gold bullion is an illiquid asset. Converting a large bar of gold into cash by selling it in the market can be painstakingly difficult. Also, you're responsible for evaluating the quality and purity of the metals. Buying bars or coins come with a huge upfront cost too.
Then there's the hassle and expense of safely storing gold bars and coins. Moreover, you often have to pay a high premium to purchase these assets. You need to constantly monitor the spot price of gold, and identify the right time to sell your assets.
Similarly, if you purchase gold jewelry as an investment, you have to pay for making charges, which aren't recoverable in the future. In other words, you won't get high returns from selling gold jewelry in the future.
All these factors make directly buying gold a problematic investment strategy. The good news is that there are several other ways to invest in gold. Let's take a look.
Safest Gold Investment Techniques
Here are the most reliable ways to invest in gold:
1. Gold ETFs
Unlike gold bullion, ETFs or exchange-traded funds don't require you to directly engage in the buying and selling of goods. Instead, ETFs are funds that track the price of gold and can be purchased or sold through a brokerage account. Trading with gold ETFs is fairly similar to buying and selling stocks on the stock market.
Each share of an ETF represents a fixed yet small amount of gold. It saves you from the hassle of spending money on a mammoth gold bar. Also, gold ETFs are known to have smaller expense ratios, making them suitable for new retail investors.
2. Mutual Funds
Just like ETFs, you'll find mutual funds that invest your money in gold companies or bullion. In either case, you can invest in mutual funds through a standard brokerage or IRA account.
Also, you don't have to go through the trouble of researching gold companies. Nor are you responsible for storing your assets in a vault. Make sure you choose an actively managed gold-only mutual fund.
3. Mining Company Stocks
It's another safe and stress-free way of investing in gold. Instead of buying gold bullion or ETFs, you can purchase stocks of gold mining companies. These companies don't just experience a rise in stock prices when the spot price of gold increases. They can further manipulate their stock prices by ramping up production and earning more profits.
Nevertheless, it's important to choose the right gold mining companies to invest in. Beware of small-time miners who don't even have a producing mine. Make sure you research every company before deciding to purchase their stocks.
If directly buying mining company stocks seems daunting, you could also consider ETFs and mutual funds that own such stocks. It's a risk-free way of leveraging the benefits of mining company stocks without having to conduct thorough research.
4. Digital Gold
It's one of the newer ways of investing in gold. Instead of physically selling gold bullion, many fintech companies let you purchase gold from various dealers and manufacturers. But you don't have to redeem your purchase right away. Instead, you can use it for subsequent transactions or redeem your investment at a later date. Or you can sell your assets when the spot price of gold is on a steady incline.
Make the Most of Your Gold Investments
There's a difference between buying gold as a possession and investing in it as a commodity. While gold bullion offers the tangibility of investing in the precious metal, it's associated with several drawbacks, including illiquidity, storage costs, and high premium. Instead, you should explore safer alternatives, such as investing in gold ETFs, mutual funds, and mining company stocks.
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