The Best Way to Invest in Gold for Newbies
The Best Way to Invest in Gold for Newbies
Since the dawn of time, gold has been a symbol of wealth and success. Similarly, it is seen as a safe-haven asset as it has historically maintained its value with the passage of time. It has served as a form of insurance against unfortunate and adverse economic events. Therefore, investing in gold has always been a hot topic among investors.
Why Investing in Gold Matters?
Gold is the oldest form of currency, and it was a global standard for trade before 1970. Now, we have the fiat or paper currency, which is issued by central banks and most commonly carried in your pocket as cash.
In the last couple of years, the world has been going through a period of global economic uncertainty. These currencies started to lose the confidence of investors as a result of hyperinflation, underinflation, recession, and stock market crash. In response to this critical period, gold comes out to be the most reliable investment. One may consider investing in gold for the following reasons:
To make money from it – when gold prices go up, so does your wealth
To protect your wealth – whether you believe a recession is coming or not, gold has historically been a safe bet for your money
It is liquid – it is very easy to convert into cash
How Do You Invest in Gold?
There are two main ways that you can put your money into gold:
You can buy physical gold
You can invest in gold via the stock market
Investing by Buying Physical Gold
Buying physical gold is the best way to invest in gold. Physical gold is where you actually own the gold, so you can hold it, wear it as jewelry, or store it in a safe.
The most common form of physical gold people usually invest in are:
Gold bars also known as bullion
Gold coins
Jewelry
Investing in gold bars has always been the main option for investors as they get the best price of gold. Meanwhile, coins and jewelry are given as gifts on special occasions like weddings.
Physical gold is less risky as compared to investing in stocks. In the latter, if the price goes down, you are left with nothing more than a piece of paper in your hand. However, a physical ounce of gold is always going to be an ounce of gold, no matter its worth.
The value of gold is tied to its supply and demand. It often changes quickly, so an investor has to wait for the right time to sell it so that they could earn maximum profit. Keep in mind, though, this option can be expensive due to dealer commissions, storage costs, sales tax and security measures.
Unallocated Gold Investing
This is an indirect way of investing in physical. It is considered to be the best way to invest in gold by making a contract with the dealer. It is still physical, but it is not in your hands as you are investing in the dealer’s pool of gold.
How Do You Buy It?
There are many ways by which you can own a gold bar. Some of them are given below:
You can literally walk into a bullion shop and walk away with gold in your hands.
You can buy it online and have gold delivered at your doorstep.
There are a few apps out there that let you trade gold on your phone such as GoldPass and SendGold.
You should confirm the authenticity of a dealer before buying gold by any means mentioned above as there is always a chance of being deceived by fool’s gold.
Investing Through the Stock Market
Another best way to invest in gold is through the stock market. You have a few options in this regard:
Buying Gold Stocks
A great way to invest in gold using the stock market is by profiting from gold prices rather than physically owning it. Investors buy shares in companies that have gold exposure like gold mining corporations. The growth and decline in the stock depend on the future earnings of the company and not just on the value of gold.
For this, you have to choose the right company to invest in, which is not always easy. For instance, effective management, project development, production costs, mine exploration, reserves, and hedging activities are some of the factors to consider before buying the stocks of a gold mining company.
In the stock market, you do not own any physical gold, so you are exposed to all the usual risks that the stock market carries such as stock market volatility, company bankruptcy, and the possibility of losing your investment entirely.
Investing in ETF
If stocks aren’t for you, you can also invest in a gold-themed exchange-traded fund like VanEck Vectors Gold Miners ETF, ETFS Physical Gold, and Perth Mint Gold. ETFs are considered to be the best way to invest in gold. These are investment funds that are traded on a stock exchange. They are usually used to invest in commodities, stocks, and bonds.
When you invest in a gold-themed ETF, you buy shares in multiple companies, sometimes hundreds of them at a time. Hence, if shares in one company go down, you may still have a relatively minimal loss as shares in other companies could go higher and can contribute to overall profit.
Conclusion
If you think a recession is just around the corner or you want to diversify your stock portfolio, it’s the right time and a wise decision to buy gold as it could be a great asset. It is always better to know the different forms of gold available and the best way to invest in gold. Choosing a certain way may come with its pros and cons, which have to be considered and analyzed before making a final investment decision.