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Investing in gold has long been considered a safe and profitable strategy for diversifying investment portfolios. In uncertain times, the demand for gold as a store of value tends to increase.
Although learning how to invest in gold may seem daunting for beginners, it can be a lucrative addition to your investment portfolio with the right research and strategy. Read on to learn about the best ways of gold investing for beginners and find out tips on how you can get started today.
Table of Contents
Why Investors Buy Gold
Gold has historically been considered a store of value and a hedge against inflation and economic uncertainty. Up to this day, investors are drawn to gold for several reasons. Here are a few key factors that make gold an attractive investment:
- Liquidity – Despite being a tangible asset, gold is highly liquid and can be easily converted to cash.
- Value storage – Gold allows investors to hold value in a physical asset, providing a tangible form of diversification.
- Returns – Gold has historically delivered attractive returns, although it may not always outperform other investment classes.
- Safe haven – Gold tends to increase in value during periods of economic downturn, providing a safeguard against market volatility.
Best Ways of Investing in Gold for Beginners
There are various ways of buying gold for beginners, each with its own advantages and considerations. Here are the seven best ways to invest in gold:
1. Gold Bullions
Gold bullion is essentially pure gold in the form of bars or coins. Gold bars are typically certified for weight and purity, often with a serial number for security purposes. The size of gold bars can vary, and even a small amount can be considered valuable. Investing in gold bullions can be rewarding but requires secure storage and finding buyers willing to purchase in the specific bar size.
2. Gold Coins
Gold coins are a popular and convenient way to invest in gold. They are smaller in size compared to gold bars and can be purchased from collectors or private dealers. Gold coins are widely available and easily bought and sold. It’s important to be aware of the collector’s value, which can sometimes lead to higher prices. Focus on widely circulated coins unless you have an interest in becoming a collector.
3. Gold Jewelry
Gold jewelry is a frequently overlooked form of gold investment. Approximately 49% of global gold production is used to make jewelry, making it an easily accessible market for beginners. Jewelry pieces with a purity of 14k or higher are considered an investment in gold. However, it’s important to consider the resale value and potential difficulties in finding buyers for gold jewelry.
4. Gold ETFs & Mutual Funds
Gold exchange-traded funds (ETFs) and mutual funds offer a convenient way to invest in gold without the need for physical ownership. These funds purchase gold on behalf of investors, and the shares of these funds represent a fixed amount of gold. Gold ETFs and mutual funds provide a liquid and cost-effective way to invest in gold, although they often invest in other commodities as well.
5. Gold Futures Contracts
Gold futures contracts are agreements to buy or sell gold at a specified future date and price. Each contract represents a certain amount of gold and can be settled in either cash or physical delivery. They are typically large, making them more suitable for investors with significant capital. Options on gold futures are also available, providing investors with the right to buy or sell gold futures at a predetermined price.
6. Gold Mining Companies & Stocks
Investing in gold mining companies allows investors to indirectly access the profits of gold without physically owning it. By purchasing shares in gold mining companies, investors can benefit from the potential growth of the company and the underlying value of gold. However, investing in gold mining companies requires thorough research, as there are additional risks associated with the mining industry.
7. Streaming & Royalty Companies
Streaming and royalty companies provide upfront financing to mining companies in exchange for the right to buy gold or other commodities in the future. These companies act as intermediaries, receiving profits in the form of gold. Again, investing in streaming and royalty companies can be complex and requires in-depth knowledge of the mining industry and associated risks, so it might not be the best option for absolute beginners.
Gold Investment for Beginners – Top Tips
If you are a beginner looking to invest in gold, here are some essential tips to consider:
- Determine the amount of your investment – There is no set amount of gold that makes a good investment. As a general rule of thumb, many investors allocate around ten percent of their assets to gold investments to diversify their portfolios. Regularly review your portfolio to ensure you maintain a percentage that aligns with your risk tolerance.
- Choose the right time to invest – Gold purchases should be made incrementally over time to counteract price fluctuations. Monitor the value of gold and the prices of various gold investments to determine the best time to start investing.
- Research and due diligence – Before making any investment decision, conduct thorough research on the various types of gold investments and the associated risks. Understand the market dynamics and the factors that can influence the price of gold.
- Identify reputable sellers – When buying physical gold, it is crucial to recognize reliable sellers to avoid scams and ensure fair pricing. Utilize online resources and seek recommendations from trusted sources. Inquire about fees and additional costs associated with the purchase.
- Secure storage – Physical gold investments require secure storage. Consider renting a safety deposit box or installing a safe at home. Factor in the costs of storage and consider purchasing insurance to protect your investment.
- Diversify your portfolio – While gold can be a valuable investment, it should be part of a diversified portfolio. Don’t rely solely on gold but consider other investment classes to spread risk and maximize potential returns.
- Stay informed – Keep yourself updated on market trends, economic indicators, and geopolitical events that can impact the price of gold. Stay informed through reputable sources and consider consulting with financial advisors for expert guidance.
The Bottom Line
Investing in gold can be a prudent strategy for diversifying your investment portfolio and protecting against market volatility. With various investment options available, beginners can find a suitable entry point into the gold market.
By considering the tips provided and conducting thorough research, you can make informed investment decisions and potentially benefit from the long-term value of gold. Remember to always stay informed and regularly review your investment strategy to ensure it aligns with your financial goals.
Article Sources
At Gold IRA Blueprint, we dive deep into the world of gold IRAs, using trusted sources to back up our insights. Our sources range from official documents to expert interviews, ensuring our content is both accurate and reliable. We also draw on research from reputable publishers to give you the most comprehensive understanding possible. Check out our editorial policy to see how we maintain our high standards for accuracy and fairness. Also make sure to check out our Financial Review Process to have a better understanding of our process.
- Bromberg, M. (2023) 8 good reasons to own gold, Investopedia. Available at: https://www.investopedia.com/articles/basics/08/reasons-to-own-gold.asp.
- No author, 24 facts about gold (2017) World Gold Council. Available at: https://www.gold.org/about-gold/gold-facts.
