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Different Ways of Investing in Gold

The value of gold continues to rise, meaning there may have never been a better time to make an investment. With a wealth of options available, all claiming to be the best for diversifying your portfolio, protecting you against inflation, and providing you with insurance against a currency debasement, it can be difficult to know which is the right choice for you.

When deciding how to invest in gold, it is essential to know the benefits of each method as some are far riskier than others; for example, liquidity and costs associated with the form of any given asset vary greatly. The best option for you will depend on your level of market experience and familiarity with gold products. Following are some of the best options where the value of gold will always remain high.


1. Gold Bullion

Direct ownership of gold is possible through a variety of products ranging from bars to coins and jewelry. As the value of gold bullion will never drop to zero, this a very secure option; however, it will often be a long time before you can make a profit on your investment.

Gold must be kept in a bank safety deposit box or in your home. The downfall of this is that it can cause difficulties if you are buying more than a reasonably small quantity. Further problems may be incurred through insurance and transaction fees that may add up to more than your gold is worth. It is therefore not usually a good option for investors looking to put a significant amount of their wealth into gold.

If you do choose to invest in gold bullion, ensure that you avoid inflated premiums; the price you pay should be no more than 10 percent of the value of gold. This is especially true if you are looking for a long term investment. Very rare coins tend to have the highest premiums while this cost is not usually redeemed. Unless you are a collector of numismatic or semi-numismatic coins, it is advisable to invest in other means.


2. Exchange-Traded Funds (ETFs)

Exchange-traded funds are a popular option in order to include gold in your portfolio without facing the issues related to storage. ETFs are mutual fund trades on the stock exchange and are physically backed. Most ETFs involve investors owning the equivalent of 1/10 ounce of gold. Investment works exactly as if you own the gold, in terms of profits and taxes, although you do not physically own anything.


3. Mining Stocks

Purchasing mining stocks involves buying shares rather than the metal itself. The risks are slightly higher than exchange-traded funds though the potential for profit is greater. Mining stocks can further be divided into the categories of senior and junior. Senior gold stocks are suited to the more conservative investors while the latter are ideal for those with a greater risk tolerance.


4. Mutual Funds

Mutual funds are one of the most recommended methods of investment by advisers for a safe option in the stock market, and this can also be applied to gold investment. Mutual funds are a good option if you are looking to invest in several fields rather than sticking entirely to precious metals.

Mutual funds vary widely in terms of predictability and transaction fees so are best suited to those who have a good knowledge of the stock market. Some funds may even charge an additional fee if you choose to cash out before a designated time, usually between six months to a year, so it is important to have an investment period in mind before buying into the fund.

The problem with options 2, 3 and 4, is that you don’t actually own any physical metal.  That could mean, in a total economic collapse, they might not be worth the paper they are printed on.  You are also at the mercy of other “managers” as to their decisions and choices in managing their companies, funds and stock.

While some people believe the chances of this level of collapse are unlikely, others will tell you it is an almost certainty.  And the number of individuals on that side of the spectrum are increasing.

You need to make your own risk tolerance vs convenience decision.


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