Throughout history, gold has remained a smart option for a stable investment. In recent years, uncertainty about the future value of paper money has led to increased interest in gold, and the soft, precious metal is now popular with investors at all levels. Here’s a look at the key facts regarding smart gold investment for beginners.
Calculate Investment Size
All smart investors have limits on how much they spend on individual parts of their investment portfolio, including gold. If you’re just getting started, you’ll probably want to devote about three to five percent of your portfolio to gold and other precious metals. If you later decide you want to invest more heavily in precious metals, it will be easy to do so.
Gold Investment Options
When you add gold to your investment portfolio, you have plenty of options in front of you. Depending on the size of your investment and the percentage devoted to gold, you’ll want to invest your money carefully. Here are the three basic forms of gold investment.
Keep Gold In A Brokerage or Mutual Account
With a gold exchange-traded fund, or ETF, or a gold mutual fund you can easily trade gold into and out of your investment portfolio. With these types of accounts, you can trade gold quickly and there’s no risk of theft, unlike with investment in gold coins or bullion. Also, there are no issues with state taxes concerned with these types of gold assets. However, this type of investment prevents direct access to coinage or bullion if they are needed during a financial emergency.
Keep Gold Bullion or Coins
This option involves the purchase of physical gold and keeps it in either a home safe or safe deposit box. Investors can purchase these items from coin dealers, bullion companies, or the U.S. Mint. By having these forms of gold on hand, an internationally recognized form of currency is available for emergency use. At the same time, however, this form of investment involves storage expenses and exposure to the possibility of theft.
Purchase Gold Industry Stock
Investors can also buy gold mining or processing company stock in their brokerage accounts. Company shares often follow current gold prices, and this method of investment is considerably safer than keeping physical gold. Investors who go this route often enjoy greater capital appreciation associated with increased share values that follow higher bullion prices and discoveries of gold stock. Unfortunately, investors in gold stocks may also suffer the loss of investment capital in cases of mining company mismanagement or bankruptcy.
Specific Portfolio Strategies
Although the above investment strategies can be used on their own, combinations involving additional funds, bullion, gold ETFs or mining company shares may offer more stable growth over the long term with a wise investment. For direct physical gold investment, investors should shop around to locate the best prices from dealers.
Transportation and storage of precious metals, including gold, invariably involves the risk of theft. For this reason, special arrangements should always be made to ensure the safe delivery of gold bullion and coinage.
No matter which investment option is chosen, gold is a reliable addition to any investment portfolio. As the world’s economy changes over time, gold’s value is likely to remain high and stable.
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