Gold is a safe heaven in times of inflation because it retains its value much better than currency-backed assets, which may climb in price, but drop in value. Gold has been a popular investment for investors for centuries. The experts say you should spend 10% of your assets in gold.
It`s easy to buy stocks, but investing in gold is something different. There are a number of different ways to invest in the underlying movements of the precious metal. If you invest in the wrong type of gold investment you can end up with an underperforming asset, even if the price of gold is moving fast in your favor.
Some people will try to tell you the story that empires were built on gold and how the fiat currency of the U.S will plunge and be worthless. The fact is that gold need to be treated in the same way. So, be careful and try to invest in the right option available for investing in gold.
You can buy physical gold, derivates contracts, gold mining stocks or exchange traded funds. Which one is the best to put the money in? Don`t invest in gold with the idea it always go up. It doesn`t. It goes up and down like any other investment products.
You can buy physical gold and safe-keep it in you own house. This is the most traditionally way of investing in gold. But it is also the most inefficient way to own gold. You can buy coins or bars from an online dealer.
Unfortunately, you have to pay sales tax on their purchase and more inefficiencies come up when you go to sell the gold you have since the IRS consider gold bullion and coins «collectables» which are subject to a higher maximum tax rate of 28%.
If you plan to store all your gold in your own home there may ba another problem. The risk is high when it comes to theft, fire and natural disasters. Another plan is to put the bold in a box at the bank, but that will cost a fee and you will not be able to access your gold if you want to sell it short.
Investing in gold futures or options makes you leverage a lager amount of the precious metal. You can profit on the price move depending on whether you are bullish og bearish in the market. The downside is that this strategy is very volatile. It`s up to you: you can turn a small amount of money into big profit or you can lose everything you have very quickly.
Another risky business is investing in mining gold stocks. Pick the right junior or major stock. Junior companies are small companies which is very speculative hoping to find a big score. Major miners are more established.
As the price of gold goes up, the margins of the companies go up as well. This can be reflected in their stock prices, but like other stocks, if the mining company have a poor management tbe price of shares will suffer even if the gold price moves higher.
ETF (Exchange Traded Funds) is probably the smartest way of investing in gold. The most popular gold ETF is SPDR Gold trust (GLD). One share is about 1/10 of an ounce of the spot price of gold.
Another ETF is the Market Vectors Gold Miners ETF (GDX) which tracks the major miners and the other one with the symbol GDXJ which tracks the junior miners. GLD tracks the movement of gold and have low expenses.
It is liquid and you can sell it whenever the stock market is open. Investing in GLD eliminates the storage issues and lower your risk. This investment is better than putting all your eggs in one basket. GDX and GDXJ will not always track the price of gold as GLD by being proxy for the mining industry as a whole. GDX and GDXJ spread the risk across multiple companies in the gold mining industry.
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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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