As with most financial things, gold markets are complex. For us, the best type of gold to buy is physical gold bars. Precious metal has been loved for centuries as a safe haven in which to grow and store wealth, and physical ingots better reflect these qualities today. Gold stocks are usually more attractive to growth investors than to income investors.
Gold stocks generally rise and fall with the price of gold, but there are well-managed mining companies that are profitable even when the price of gold falls. Increases in the price of gold are often magnified in gold stock prices. A relatively small increase in the price of gold can lead to significant gains in the best gold stocks and owners of gold shares generally get a much higher return on investment (ROI) than owners of physical gold. Of all the forms of investing in gold, the riskiest is trading futures or options contracts, a form of speculative investment.
Futures and options are derivatives, meaning that their value is based entirely on the price of an underlying asset. You may be familiar with the popularity of gold coins from infomercials and other ads. This way of buying and selling gold is well known and often more convenient than gold bars because of their smaller size. Investors can buy gold coins from collectors or private traders and eventually sell them for profit.
Dealers are located in most cities, making it easy to buy coins from. To make buying easier, gold coins are one of the best ways to invest in gold for beginners. The biggest advantage of using futures to invest in gold is the immense amount of leverage you can use. In other words, you can own many gold futures for a relatively small sum of money.
If gold futures move in the direction you think, you can earn a lot of money very quickly. Investing in gold stocks, ETFs, or mutual fund is often the best way to expose yourself to gold in your portfolio. They are well positioned to benefit from higher gold prices without assuming the risks associated with physical gold mining. This is one of the best ways to invest in gold, as ETFs and mutual funds allow investors to work with gold, without having to deal with physical property costs (such as securities or gold insurance).
Government title to all gold coins in circulation and end the minting of any new gold coins. Gold futures are more liquid than physical gold and have no management fees, although brokerages may charge a trading fee (also called a commission) per contract. This means that the value of gold, mutual funds and ETFs may not fully match the market price of gold, and these investments may not have the same return as physical gold. Investing in gold mutual funds means that you own shares in multiple gold-related assets, such as many companies that mine or process gold, but you don't own real gold or individual shares.
Due to the wide availability of gold stocks and ETFs, you don't need to be a stock selection guru to participate in the improvement of the gold industry. The SPDR Gold Shares ETF (GLD), for example, holds physical gold and deposit receipts, and its price follows the price of physical bullion. Gold mutual funds, such as the Franklin Templeton Gold and Precious Metals Fund, are actively managed by professional investors. Cost overruns, mismanagement and excessive debt can cause gold mining stocks to outperform the price of gold.
Investors can invest in gold through exchange-traded funds (ETFs), buy shares in gold miners and partner companies, and purchase a physical product. Mutual funds or mutual funds that are traded on the gold exchange have more liquidity than owning physical gold and offer a level of diversification that a single stock does not have. Keep in mind that ETFs and mutual funds dealing with gold often invest in other commodities as well, which means that you will rarely find a company that trades strictly in gold. The various types of gold investments listed above can serve as a starting point for beginners interested in learning how to invest in gold.
Since most investors turn to gold to diversify their existing portfolios, a good rule of thumb is to keep around ten percent of their assets in gold investments. Buying gold stocks instead of the physical metal has many benefits to reaping the benefits of investing in gold. . .