The last few years have seen an enormous rise in the popularity of a number of alternative investments; from cryptocurrencies to digital space, stocks and shares to artworks and antiques.
There is one investment, however, that stands the test of time, and which has proven popular for centuries of human society: gold.
Investing in gold may seem like an old-fashioned choice, but it is an option that is becoming increasingly popular amongst all types of investors and those looking to secure their futures.
Opt from purchasing the physical asset – gold itself – or buy into shares in an exchange-traded fund or mutual fund.
You can also trade options and futures on the commodities market. No matter how you like to invest, there is a method available to you – and we have all of the information you need to make a smart, informed choice and move forward with total confidence.
Why Invest In Gold?
You may be wondering why you would invest in gold when there are a host of other investment opportunities available, many of which we have discussed.
Despite popular belief, gold offers a number of significant benefits to investors, especially if you are looking for a long-term, stable investment solution. Some of the most popular benefits and motivations for investing in gold include:
Global Price Stability
One of the main benefits of gold compared to other investment opportunities is that this is an investment that retains the stability of its price all across the world, and which holds its price no matter what.
Political upheaval, unrest, and other global crisis situations will not alter the price of gold – in fact, history shows that a crisis in the financial market actually drives people towards investing in gold, and this helps to raise the price significantly.
Any turbulence in the global equity markets will see your investment grow in value, and this can be reassuring when compared to the ever-changing nature of the stock market.
Protection Against Inflation
The longevity of gold also means that it can be very useful in helping to protect your investment against inflation – an issue that is often a key concern for many investors.
Inflation refers to the rate at which money loses its value over time, and this is where gold takes the top spot once again.
Many financial experts have noted that gold consistently outperforms the inflation rate, helping to provide you with a useful buffer no matter what the market is doing – this is great for diversifying your portfolio, spreading the risk, and helping to protect your investment on a more long-term basis.
Little Financial Knowledge Required
This may seem like a bold statement, but you will require very little financial savvy and knowledge to trade and invest in gold, especially when compared to other, more complex investment opportunities, particularly those in the digital space.
Gold is something that has been invested in for centuries, and while electronic versions are now growing in popularity, the simplest method of investment is still simply purchasing the physical product, as we shall explore shortly.
As an added bonus, gold is easy to trade, buy and sell – it is a global language that will be understood by the majority of investors, and the ease with which value can be tracked and assessed means that you can cash in on your investment whenever you need to.
Little Ongoing Maintenance Required
There are some types of investment that demand a lot of your time – you may be required to continuously check in, assess, and compare with the market in order to determine how to maximize your profit.
While many of these options can be extremely lucrative, they can also be time-consuming. Gold, on the other hand, can simply be stored physically or digitally, without you really having to do anything with it.
For some investors, this gives gold a real advantage over options like stocks and shares, or even physical assets such as property, which typically need a lot of time, effort, and energy for you to really maximize the profit on your investment.
Easy To Pass On
For some investors, their motivation stems from having something to pass on to the next generation to help ensure the financial security of the family, and here again, gold comes out on top.
Physical gold can be easily gifted or stored in a secure location, and distributing your assets is a less arduous task.
As we have mentioned, gold is an investment that holds its value and is able to ride out the waves of inflation, political instability, and global emergencies.
This means that you can hand over your gold investment to your children and grandchildren without worrying that they are inheriting something useless or non-profitable.
Easy To Liquidate
Many investors enjoy the ease with which gold can be liquidated in the event of an emergency, and this is one major reason for its popularity.
We never know what life is going to throw at us and this is why a diverse portfolio is so important.
In many cases, you will be able to sell gold relatively painlessly, and many banks or financial institutions will see this as suitable collateral for a loan.
How Can I Invest In Gold?
As we have seen, there are a number of advantages to investing in gold, and plenty of motivation for this asset to form a key element of your portfolio.
There are four main methods to investing in gold: buying gold bullion, buying gold funds, buying gold futures options, and buying gold mining stocks.
The best option for you will ultimately depend on your own unique investment goals, despises, and long-term aspirations.
Buying Gold Bullion
Gold bullion is one of the easiest and most accessible ways to invest in gold. Gold bullion refers to the actual physical, yellow metal, and tends to come in either bar or coin form.
Most individuals will be able to access gold bullion from a bank, broker, or specialist dealer who works with precious metals.
Bars can be purchased in a range of sizes, and these tend to range from a quarter-ounce wafer, right up to a 400-ounce brick. Individuals may also choose to invest in gold coins, and these tend to be the more popular option.
Gold coins differ from the numismatic coins that most of us will be familiar with; they are newly issued, and the price will be set according to the content of gold that they possess – plus a small premium on top of this.
The Canadian Maple Leaf, the South African Krugerrand, and the American Eagle are the most popular, and more widely circulated examples, and so prove a smart investment for those who are new to investing in gold – they are always going to be in demand, and so you can protect your investment.
When purchasing physical gold, be it coins or bullions, you will need a secure storage solution – most investors opt for a safe deposit box, or home safe – as well as insurance.
You should also take care to purchase from reputable, authentic dealers.
Gold jewelry is another popular option, particularly if you are the type of investor who likes to get real value from your investment and enjoy it on a regular basis.
This can offer extra value, as many pieces of jewelry also come with precious metals and gems, and this boosts the overall value of the piece and the investment.
Jewelry can also be passed down to the next generation with relatively minimal effort, and can typically be protected by most home insurance policies for added peace of mind.
It should be noted, however, that it is not a good idea to invest in jewelry strictly as a means of financial investment, as the retail price will typically exceed the meltdown value of the piece, as a result of the retail markup, and the cost of the workmanship.
You should also take care to determine the purity of any gold that you purchase, and ensure that you are paying a fair price.
Buying Gold Funds
While there are a number of advantages to purchasing gold as a physical asset, there are also downsides – typically the higher transaction costs, the insurance that is required, and the cost of safely storing and securing your investment.
These disadvantages drive some investors to consider alternative options and investing in mutual funds, and exchange-traded funds tend to offer an easy, affordable way of participating in gold investment.
With this type of investment, shares are traded on the New York Stock Exchange, and you will be able to buy or sell your shares at any time of the trading day, in exactly the same way that you would a more traditional stock.
For reference, every share of an exchange-traded fund will represent one-tenth of an ounce of gold – this means that if gold is currently trading at a price of $1300 per ounce, then the gold exchange-traded funds will trade for around $130 for each share.
There are some funds that trade exclusively in bullion or physical gold, and this can be useful for helping investors access the price of the metal directly.
Other options may spread their specialism between bullion and other options, including shares of publicly traded companies who are working in gold production, refining, or gold mining.
Investing in exchange-traded funds does incur a greater level of risk than investing in gold bullion, and the stock prices of gold tend to rise and fall at a faster rate than that of physical gold itself.
When investing in individual companies, you are also opening yourself up to risks that they face which are unrelated to the price of bullion, and this may include environmental issues and political challenges.
On the flip side of this, however, is that you may be able to enjoy the greater potential for appreciation of your investment, and this is not offered when you purchase the physical asset.
Buying Gold Futures Options
Another popular choice for more experienced investors tends to be buying options on gold futures, or options as part of a gold exchange-traded fund; these allow the investor to buy or sell gold at a specific, pre-determined price, for a limited amount of time.
You can use your options when you suspect that the price of gold is rising or falling, and a wrong guess will only cost you the premium you paid when you entered into the contract.
Futures options can be a little difficult to get your head around – especially if you are new to investing -and so are best left to those who already have considerable experience in trading gold, or investing in other, more complex areas.
Buying Gold Mining Stocks
Gold mining stocks are also an option, but one that carries more risk than the other investment opportunities we have discussed, as the success or failure of the individual company will determine the price of the gold stock, rather than the price of bullion.
This is typically determined by how well the business deploys capital and generates profits, rather than the value of the metal.
Final Thoughts
Investing in gold is a great way to diversify your investment portfolio, ensure long-term financial security, and help to safeguard your investments against inflation and the ever-changing global situation.
The best investment type will depend ultimately on your own unique investment aspirations, but as a general rule, the physical bullion is a great choice for those who want something physical, while exchange-traded funds (ETFs), are a great option for a diverse, secure portfolio.
By doing a little research, you can make the most of your investment portfolio, and ensure that you have a strong, sturdy buffer against future market volatility and fluctuations, as well as something that can be handed down to future generations with minimal stress.
