The correct investment strategy will strike a fair balance sandwiched between risk level and effectiveness. Given the many changes that took place due to COVID-19, discovering a strategy that reduces risk and exploits profits can appear more challenging than ever. Fortunately, there are a few investments that have achieved well throughout history, the most recognized being gold.
Gold is a good investment for those looking to expand their existing portfolio. The performance of gold is frequently the reverse of traditional investments like stocks and bonds. When these assets perform undesirably, the value of gold generally upsurges. This inclination has led many stockholders to think of gold as a safe investment, while further highlighting its standing in a diverse portfolio. A great example of this inclination can be seen by looking at the value of gold throughout 2021 — when gold reached its highest price in the past seven years.
How to invest in gold?
The first thing that comes to the mind of most people when thinking of investing in gold is jewelry, or perhaps gold coins. In reality, there are many ways to buy and sell gold. Here are the 7 best ways to consider while investing in gold:
- Gold Bullions
- Gold Coins
- Gold Jewelry
- Gold ETFs & Mutual Funds
- Gold Futures Contracts
- Gold Mining Companies & Stocks
- Streaming & Royalty Companies
1. Gold Bullions
Gold bullion stands for any form of pure gold, with the most recognizable example being gold bars. Gold bars must be qualified for weight and purity, and will typically have a serial number for security reasons. Gold bars can differ in size, and it doesn’t take much to be considered valuable.
There are a few problems with buying gold bullions, as you will typically want a protected location and insurance to secure the investment. Moreover, gold bullions can be a tough asset to buy and sell as you have to classify buyers ready to purchase in the whatsoever sized bar you have the asset in. That aside, many investors find this system to be highly gratifying and one of the best ways to invest in gold.
2. Gold Coins
You might be familiar with the popularity of gold coins from advertisements and other commercials. This method of buying and selling gold is well-known, and every so often more convenient than gold bars due to their smaller size. Investors can buy gold coins from collectors or private dealers, and ultimately, sell for a profit. For the luxury of buying, gold coins are one of the best ways to invest in gold for beginners.
Rarely, you might run into gold coins that are marked up due to their collector’s value. The collector’s value can make the coins more expensive than the actual base value of the gold. Most casual investors will dodge these and focus on more generally circulated coins lest they are interested in becoming collectors as well.
3. Gold Jewelry
Gold jewelry is perhaps the most commonly bought and sold form of gold investment, however, you may not even think of it as such. In fact, gold jewelry is extremely beginner-friendly because it can be easily acquired.
Mostly, any piece of jewelry at 14k or higher is considered an investment in gold. While it is comparatively simpler to acquire, there are some drawbacks to contemplate. In some cases, gold has a questionable resale value. This means it might be problematic to classify a buyer and sell your jewelry for a profit later on.
If you just wish to safeguard your money for the foreseeable future then gold jewelry can still work out sweetly.
4. Gold ETFs and Mutual Funds
Gold exchange-traded funds (ETFs) and mutual funds are accounts that purchase gold on the behalf of an investor. The shares that make up these funds each indicate a fixed amount of gold and can be bought and sold like stocks.
This is considered one of the best ways to invest in gold as ETFs and mutual funds permit investors to work with gold, without dealing with the costs of physical possession (like security or gold insurance).
There are fees associated with buying and selling gold through ETFs or mutual funds, but they are much lower when compared to the other assets and their management.
Remember that ETFs and mutual funds dealing with gold often invest in other possessions as well, meaning you will hardly find a firm that deals strictly with gold. This can be advantageous if your goal is to expand, though it may require you to learn about other markets as well as gold. Be ready to research different funds when considering ETFs or mutual funds for your gold investment.
5. Gold Futures
In simple words, gold futures are contracts to buy and sell gold at a certain point in time. A certain amount of gold is represented by each contract, and depending on the conditions can pay out in either a dollar amount or physical gold. Gold futures can be very large, a policy well appropriate to investors with the capital to buy high-valued contracts.
There are also choices on gold futures to reflect. This gives investors the option to purchase a futures contract for a present price at a certain point in time. Choices can help buyers control their initial investment; however, they are required to pay the original value of the gold to fully own the option. Both gold futures and choices are considered to be unpredictable — making them more difficult to manage when compared to other forms of gold investments.
6. Gold Mining Companies and Stocks
Investing in gold mining companies can be an exciting way to combine gold investments with traditional stocks. By buying shares in a company that works with gold, without buying or selling it themselves, investors can access the profits of gold. This kind of investing can also provide lower risks, as there are further business factors at play that can help guard investors from flat or falling gold prices.
With that said, investors conduct important research when searching for the right company to invest in. There are risks connected with the mining industry that can hinder complete profits or even bring up ethical worries. Always remember to do your research when selecting a company to invest in.
7. Streaming and Royalty Companies
Streaming and royalty companies are one more way to invest in gold through stocks. These companies will deliver cash upfront to mining corporations for the right to buy gold (or other commodities) in the future.
Try thinking of them as financing companies who collect their profits in gold. This form of investment also needs investors to learn more about the risks of gold mining and the companies related. The level of study required to successfully invest in streaming and royalty companies can be a blockade to entry for some people.