How to Invest in Gold
Investing in gold has been done since ancient times. It is considered a relatively safe investment object, thus it is often used as a hedge against severe economic crisis and economic fluctuations. This post will explain more on how to invest in gold.
Investing in Physical Gold versus Gold Exchange-Traded Funds
If you want to invest in gold, you can either buy gold yourself or buy shares of gold exchange-traded funds. Each option offers benefits and drawbacks. Which one to choose depends largely on your personal preferences.
Buying Physical Gold
Buying gold and storing it yourself, offers a direct investment in the price of gold. You can either buy gold coins or gold bars.
If you buy gold coins you will not maximize the amount of gold you receive per dollar spent. Gold coins offer added value in other ways though, since they also act as collector’s items, and old, rare coins, thus has value far beyond what their weight and the current price of cold suggests.
If you want to directly invest in the price of gold, buying gold bars offers the best value. Buy the bars in the largest size you can afford, as this will reduce the premium the dealer receives per unit of gold.
Investing through Gold ETFs
If you have no desire to store gold yourself, but still want to invest in the price of gold, gold exchange-traded funds, abbreviated gold ETFs, offer a great alternative.
Gold ETFs are investment funds that track the price of gold. Shares in these can be bought on major stock exchanges, including New York, London, and Paris. The ETF will either directly buy physical gold or they will track the price of gold using various financial instruments, such as stocks in gold mining companies or futures contracts.
Holding physical gold allows gold ETFs to most accurately track the price of gold, but it is associated with higher expenses, since transporting and storing gold is expensive. Using financial instruments on the other hand reduce expenses, but can result in significant deviations between the value of the fund and the gold price.
How to Decide
If you want to invest in gold, the first decision you must make is whether you want to store gold yourself. If you like the idea of having the gold in your house or in a bank vault, this is a great option. However, if you think of storing gold more as a hassle, investing in gold ETFs is an attractive alternative.
