BEST WAY TO INVEST IN GOLD
If you have been thinking of investing in gold,
congratulations. Why? It shows you think long-term. The truth is that gold has
always been a 'safe refuge' for investors during times of economic uncertainty.
As awesome as global stock markets have been performing lately, the old saying
of 'what comes up must come down' definitely applies not just to the physical
and natural worlds but also to the finance world. Stocks often go through boom
and bust cycles. Inflation is always lurking in the background threatening to
reduce the value of your hard-earned cash. Governments are not immune from
devaluation. These are the key risks investing in gold protects against. You
would do well to diversify your investment portfolio by investing in gold. With
that said, there are so many ways to invest in gold and precious metals, for
that matter, out there. How do you pick the 'best' way to invest in gold.
The problem with defining 'the best'
Let's face it, 'the best' is a very subjective and slippery
term. Maybe this is why salesmen love using the phrase 'the best.' Hearing 'the
best' makes you feel good but chances are you're just letting your impressions
and assumptions regarding the meaning of this overused and abused phrase get
the best of you. The sad reality is that what is 'best' for your might turn out
to be a disaster for someone else. And vice-versa. Moreover, you can't base
your investment decision on what is 'best' for a salesperson trying to get you
to invest in a particular gold investment option. The good news is that there
is a powerful way to define what is 'the best' when it comes to your gold
investment options: focus on your needs. That's right-by focusing on what your
particular investment needs are, your risk profile, the amount of time and
management you're willing to put into your gold investments, and other factors,
you can come up with the best range of options when it comes to owning gold.
Keep your needs in mind when examining the different gold investment options
listed below.
Direct ownership: Physical gold
There is a certain psychological benefit to being able to
physically handle the gold you are investing in. Unlike stocks which give you a
legal share in a corporation, when you buy direct physical gold, you get to
handle the gold. You get to touch it. You get to see it. There is a
psychological benefit to this. You simply and directly feel you own something
valuable. So far so good, right? Well, the downside with owning gold directly
is that you have to worry about robbers. If you think your gold bullion is
valuable to you, it is doubly more valuable to people who want to rip it away
from you. You have to invest in a home safe or pay to have your gold stored
somewhere. Also, you have to get the proper insurance for your gold bullion
investment. When it comes time to sell, you would need to pay assay fees so the
company (most people usually sell to a company that buys and sells gold when
they liquidate) can be sure that you're selling real pure gold bullion. Keep
these details in mind. They definitely add to your cost. Also, there is a
psychological price to having physical gold in your home-you can lose sleep due
to the risk of crime.
Direct ownership: Gold coins
The great thing about owning gold coins is that you get to
play two investments in one. First, you're obviously investing in the gold
market. At the very least, your gold coins will be worth the price of the gold
they contain. Gold prices can change dramatically and you can definitely play
the gold market by buying gold coins. The second market you're investing in
when you buy gold coins is the collectible coin market. Gold coins get their
value from two sources: the amount of gold they contain and the premium
collectors pay for the coins. This is a serious consideration. Why? When you
buy your gold coins, you actually pay the base gold value and a premium for the
coin. This can be a serious headache when you try to unload your gold coin
collection. You might end up losing money if the price of gold remains stable
or the same and the collector premium of your coins don't go up.
Gold ETF
Investing in gold exchange traded funds is the safest way to
invest in gold bullion. Imagine getting into physical gold without having to
worry about burglars or paying all sorts of fees for the storage and insurance
of your gold holdings. Exchange traded funds work like mutual funds. They are
traded based on net asset value (NAV). Gold ETFs only have one asset and one
asset alone: a fixed amount of gold bullion. You basically buy the Gold ETF and
play it like a stock investment: buy low and sell high. The advantage to this
way of owning gold is that it is very liquid. You can easily buy to get in and
sell to get out. The biggest advantage to ETFs is that they make investing in
gold very easy. The downside is that you don't get to physically handle your
gold investments. Another downside is that the price of the ETF is tied to the
price of gold solely.
Gold mining stocks
One of the most interesting ways to play the gold market is
to invest in gold mining stocks. You get rid of the headaches of physical and
ETF gold investments by investing in gold mining stocks. Your stock might go up
higher than the appreciation of gold prices. Why? Your stock might enjoy a
'market premium.' This is the extra value placed by the market for hot stocks.
With gold mining stocks you essentially get the benefits of playing in the gold
and stock markets. The downside, just like with playing the stock market in
general, is picking the right company to invest in.
Thanks to ETFs and a robust stock market, getting into gold
investing is easier now than ever. Keep the investment options' pros and cons
firmly in mind when planning your gold investment moves.
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