While diamonds are forever, when it comes to investing, gold is the better choice. You can invest in gold in different ways, and each method is quite simple and straightforward.
What are gold investments?
One way you can invest in gold is with physical gold. Gold is like a global, universal currency. It is a good choice for “rainy day” saving or as a financial backup.
Many central banks hold physical gold as part of their asset base because gold is gold wherever you are in the world and holds the same value wherever you are in the world.
You can buy bullion coins, which lets you own investment-grade gold legal tender coins at a small premium to the price of gold as quoted on the markets.
The value of bullion coins and bars is determined almost entirely by the market price of gold, and thus tracks the bullion price consistently and in a way that is easy to follow.
It is practical to get your broker to buy, sell and hold the physical gold for you in specially set up accounts so that you do not have the hassle of worrying about where and how your bullion is stored securely.
The other popular choice for investors who want to invest in gold is buy shares in companies related to gold mining and exploring.
Investing in these companies is riskier than investing in physical gold. You may get a better return for your money, but this comes at a greater risk of losing the entire amount invested.
Gold ETFs for simplicity
Finally, gold ETFs are growing in popularity when it comes to investing. A gold exchange-traded fund acts like individual stocks, and trade on an exchange in the same manner.
You get all the benefits of buying an ETF such as lower costs, less hassle, experienced managers looking after your investment in addition to exposure to the gold market price.
Where to buy gold?
Physical gold is available in the form of bullion coins, minted in many countries. Bullion coins come in different weights such as 1/10oz, 1/4oz, 1/2oz and 1oz.
The one-ounce gold bullion coins are by far the most popular for both small investors and high net worth investors.
What are the benefits of gold?
The biggest benefit to investing in gold is that it adds variety and diversification to your investments.
You may have some money in bonds and some in stocks, so by adding gold to your investments, you are creating diversification that leads to lower risks and better returns over the long term.
What are the risks?
The price of gold will not plummet if the entire stock and bond markets crash. This means that if your other investments suffer from significant downturns, your gold investments are still protected and keeping up good values.
When to invest in gold?
It is a good idea to invest in gold at any time because of the insurance it provides to your investments. The biggest benefit of owning gold is when the economy takes a turn for the worse.
All your other investments may be suffering, but the price of gold will typically hold firm. In some cases, the value will go up as more investors seek protection in a down market.[ Advantage invest in gold ]
As they buy gold the price will go up and the value of your investment will rise correspondingly.
Most experienced investment managers recommend that you allocate about 10% to 15% of your total portfolio to gold.
This gives you a nice cushion of protection against market downturns and a decent source of diversification when it comes to creating good returns on your money.
This article first appeared in The New Savvy.
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