Gold has long been seen as an oasis of stability during times of economic unease and astute investors often turn to precious metals for protection in their portfolios.
There are several ways to invest in gold, from physical bullion and gold-backed ETFs to investing in shares of mining companies – each option has its own set of advantages and disadvantages.
Buying Physical Gold
Physical gold investing can be highly satisfying. Investors can purchase bars or coins in many sizes and shapes, with additional charges like authenticity certification fees, shipping fees, and insurance added to the price. While local dealers may provide easier access to product inspection before purchase, shopping around online retailers for better prices may provide greater diversity as well as savings opportunities.
No matter their method of purchase, investors who invest in physical gold must find somewhere to store it (source: https://wikifinancepedia.com/investing/how-store-precious-metals). Since it can be quite heavy and bulky to store either in your home or in a safe deposit box at a bank, storage may become quite costly as well as stressful, as you must ensure its protection from theft. Another drawback of purchasing physical gold is that it is an illiquid asset class; thus, limiting how easily investors can sell off their investments in case theft occurs.
Your optimal choice will ultimately depend on your investment strategy, experience level, and risk tolerance – however generally speaking it would be prudent to include both forms of physical gold in one portfolio, depending on needs and goals.
Buying Physical Silver
Silver is an attractive precious metal used by investors to diversify their portfolios, protect against inflation, and reap tangible goods with industrial applications. People interested in investing in silver can buy physical bullion like coins and bars directly or invest in ETFs and mutual funds that indirectly own silver commodity; or invest in shares of mining companies or futures contracts depending on individual goals – if looking to capitalize on changes in silver price through ETFs/Futures contracts then investing may make more sense than purchasing physical silver directly.
Before purchasing physical silver, it is crucial that you research dealers thoroughly. Make sure they have an active license and compare premium rates (the markup above the spot price of metals). Also factor in costs such as sales taxes, shipping fees, and storage expenses – remembering that secondary markets like pawn shops may offer lower premium rates than reliable online precious metal dealers.
Another consideration when purchasing physical silver is liquidity. Since silver is not as widely traded, it may be more difficult to quickly sell when needed – however, a reliable online dealer should offer a process for quickly liquidating assets so you can access your funds as needed.
Liquidating silver investments that indirectly hold your shares is easier with ETFs, stocks, or mutual funds that indirectly own silver than ever before. Simply reach out to your broker or investment platform for instructions on how to sell off your holdings.
Physical silver can be sold to an online dealer, coin shop, or pawn shop; stored at either a bank safe deposit box or home vault with annual fees attached; or through futures or options contracts.
Buying Gold ETFs
ETFs offer investors an efficient way to access gold’s price without dealing with the hassles and complications of buying physical precious metals. Trading like stocks, these funds can be easily purchased through brokerage accounts and robo-advisors making them accessible and easier than ever for most investors. When selecting an ETF it is essential that investors closely examine its underlying assets, investment objectives, expense ratio, liquidity, and past performance over at least five years before making their final selection decision.
To purchase ETFs, investors will first need to open either a brokerage account with a reliable firm or sign up with a robo-advisor that offers ETF investing. Once an investor has an account, they can begin researching various ETFs before selecting their favorite; an easy way to do this is using online ETF screeners which allow investors to identify which ones meet their criteria.
Once an investor has decided on their options, they can purchase ETFs directly through their broker. It is important to remember that certain ETFs may require higher minimum investments; some gold ETFs require at least $100,000 before purchasing shares – something which may put off investors without this amount available to invest.
ETFs can also be significantly less costly than purchasing physical precious metals since no storage fees or capital gains taxes apply when selling. ETFs often store physical gold in vaults owned by custodial banks.
There are also leveraged and inverse leveraged gold ETFs available that use derivatives or debt instruments in an attempt to magnify market movements, typically targeting experienced traders but unsuitable for novice investors as their profits and losses can become magnified quickly. Novice investors are best advised not to purchase exchange-traded notes (ETN) which carry higher risks of credit default than ETFs.
Buying Gold Futures or Options Contracts
Gold futures and options provide investors with an increasingly flexible method to invest in gold rather than buying physical metal directly. A gold option contract allows its holder to buy or sell gold at predetermined prices up to its expiration date – but check this 7K Metals review before going with them, as they have several options. This flexibility enables traders to tailor trading strategies according to risk profiles, investment time horizons, volatility forecasts, and future outlook. However, these investment vehicles do carry inherent risk should prices change unexpectedly they could multiply losses quickly.
Investors can purchase gold futures contracts via brokerage accounts on margin, meaning only a small portion of the total contract value needs to be put down as collateral for their position. Margin requirements usually range between 3%-10% of underlying contract value – providing significant leverage yet increasing risks as well.
Gold futures contracts provide leverage that magnifies both gains and losses, with their fluctuating price movements making them potentially unsuitable for all investors. If gold’s price declines too dramatically your broker may require you to deposit additional funds as margin to continue holding long positions – known as a margin call – which could prove costly if you are unable to meet it on time.
