Buy gold bars or coins The easiest way to put your money in gold is to buy and store gold bars, coins or jewelry. To make a real profit from the precious metal, you must have a reasonable expectation that your gold can sell for more than what you paid for it. Founded in 1976, Bankrate has a long history of helping people make smart financial decisions. We have maintained this reputation for more than four decades by demystifying the financial decision-making process and giving people confidence in what steps to take next.
One of the most emotionally satisfying ways to own gold is to buy it in bars or coins. You'll have the satisfaction of looking at it and touching it, but the property also has serious drawbacks, if it has more than just a little. One of the biggest drawbacks is the need to protect and secure physical gold. Gold futures are a good way to speculate on the rise (or fall) in the price of gold, and you could even receive physical delivery of gold, if you want, although physical delivery is not what motivates speculators.
The biggest advantage of using futures to invest in gold is the immense amount of leverage you can use. In other words, you can own a lot of gold futures for a relatively small sum of money. If gold futures move in the direction you think, you can make a lot of money very quickly. Investors can invest in gold through exchange-traded funds (ETFs), buy shares in gold miners and partner companies, and buy a physical product.
These investors have as many reasons to invest in metal as there are methods to make those investments. In fact, when looking at longer time horizons, such as in the past 30 years, the Dow Jones Industrial Average, a good representation of the stock market in general, has significantly outperformed gold. And while the stock market has its ups and downs, investing in physical gold can involve many unexpected costs and considerations, including insurance and secure storage. investing in gold mutual funds means that you own shares in various gold-related assets, such as many companies that mine or process gold, but you don't own the real gold or the individual shares.
Funds traded on a gold exchange or mutual fund have more liquidity than owning physical gold and offer a level of diversification that a single share does not offer. ETFs and mutual funds also come with certain legal protections. Please note that some funds will have management fees. Learn more about ETFs and mutual funds.
A gold futures contract is an agreement to buy or sell a certain amount of gold at a later date. The contract itself is what is traded on an exchange. Gold futures enjoy more liquidity than physical gold and have no management fees, although brokerage houses may charge a trading fee (also called a commission) per contract. Keep in mind that trading futures contracts involves a lot of risk and is not a suitable investment option for an inexperienced investor.
The amount of money you can lose with these investments may exceed your original investment. If you decide that investing in physical gold is the right thing for you, here are a few things to keep in mind. Investing in gold mining companies is an interesting way to combine gold investments with traditional stocks. By buying shares in a company that works with gold, investors can access gold profits without buying or selling it themselves.
This form of investment can also provide lower risks, as there are other trading factors at play that can help protect investors from stable or falling gold prices. That said, investors conduct significant research when looking for the right company to invest in. There are risks associated with the mining industry that can interfere with overall profits or even raise ethical concerns. Always research when selecting a gold mining company to invest in.
The gold ETF is a great way to own gold on paper. It's as easy as buying company shares, easily exchanged for cash. Buying and selling can be done using your trading account. You can buy and sell during market hours from the comfort of your home.
Contracts generally require a minimum purchase of 100 ounces of gold. Novice investors should be very careful with futures contracts because of the high degree of indebtedness that usually entails. Diversification is the indicator of a strong investment portfolio, while at the same time reducing risk and increasing profit potential. Gains from trading securities, such as stocks and bonds, are known as capital gains and are taxed at special long-term and short-term capital gain rates.
In addition, because gold produces no cash flow, in order to make a profit on gold, investors must rely on someone else paying more for the metal than they paid for the metal. Investors can buy gold coins from collectors or private traders and ultimately sell them for profit. Most gold doesn't require an uptime commitment to be profitable, but some options require more initial research than others to get started (such as futures or stocks). This is in contrast to business owners (such as a gold mining company), where the company can produce more gold and, therefore, more profits, which increases investment in that business.
The main problems with gold bars are that storage and insurance costs and the dealer's relatively large margin hamper profit potential. However, keep in mind that gold companies' shares are correlated with gold prices, but they are also based on fundamentals related to each company's current profitability and expenses. While these purchases are made with a sense of financial security in mind, metal, in its physical form, cannot be used efficiently for cash gains. However, owning jewelry is the most pleasant way to own gold, even if it is not the most profitable from an investment standpoint.
Finally, if your primary interest is to use leverage to benefit from rising gold prices, the futures market could be your answer, but keep in mind that there is a reasonable amount of risk associated with any leverage-based holding. On the contrary, business owners, such as a gold miner, can benefit not only from the increase in the price of gold, but also from the increased profits of the company. . .