Smart Finance Tips on Investing in Gold: Does the Investment Strategy as Precious as the Metal Itself?

In the early days of investing, you would receive something tangible for your investment. Whether it was actual gold bullion, a stock certificate, or a bond coupon book, you had something physical to hold in your hands in exchange for parting with your cash. Thanks to advances in technology, finance, and investing, the investment products available today have become more expansive and how they are managed and recorded has changed as well.

Now when you invest, you become a shareholder or bondholder of electronic record with only an account statement or a trade confirmation to provide any physical trail of where your investment went. And every time the economy and the financial markets become erratic, you get bombarded with advertisements lamenting about the stability of the “good ol’days” when individuals invested in gold and other precious metals.

Image of gold bars laying on a finance section of a newspaper along side a notebook and pen.

Even if the electronic nature of stock and bond investing doesn’t make you nervous, investing in gold and other precious metals as protection against unfavorable economic conditions or political unrest is a great way to diversify your investment portfolio and lower its risk.

How do you go about investing in gold?

  • Invest in gold mining companies through the purchase of company stock, exchange traded funds (ETFs), and mutual funds.
  • Purchase gold certificates. Brokers keep the physical metal but sell certificates representing the physical asset. Be wary, many scammers sell gold certificates for gold they don’t own or that was already sold to someone else.
  • Buy gold coins, bars or jewelry. Find a reputable gold dealer or jeweler and find a safe place to keep it like a fire and water-proof safe in your home or a safe deposit box at your local bank. Insurance may also be required. While pawning or selling jewelry is nothing new and advertisements for gold-selling parties popped up to provide quick cash to strapped consumers during the 2008 financial crisis, the value of jewelry might not provide as much of a return as the other gold investment types discussed in this list.
  • Trade gold futures and option contracts. You can benefit from gold’s changing value without ever having to buy and store it yourself with gold futures and options contracts. Traded on US regulated exchanges, you again exposure to the valuable asset while avoiding the scam potential of gold certificates.

Investing in precious metals such as gold may seem like a good alternative to stocks when the economy is taking a beating. However, know that there are a variety of factors that determine the price of gold besides how the local currency, stocks, and economic indicators are performing. Also, beware of rare collectible gold coins. Since the price of collectibles may exceed the value of gold, it may be harder to circulate should you need to convert your investment into cash.

When and however you do it, investing in gold can add a new dimension to your investment portfolio that reduces risk thanks to its variety and long-standing value.

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