These days, people are turning to gold investment as a means to diversify their financial portfolio as well as to set up a hedge against possible adverse movements in the financial markets over the long term. There are different ways through which you can use this precious metal as part of your investment portfolio. With the right information and guidance you can reap substantial benefits from this type of investment. You can opt to invest in gold coins and bullions or trade the market with gold-related funds and stocks.
As always, your choice of investment instrument would have to depend on your investment profile. The risks involved would differ from one form of gold investment to another. Yields likewise differ in the same way.
These are the three most popular ways of setting up your gold investment:
Buying physical gold – this generally refers to gold coins and bullions. There are regulations that you should be aware about in the buying and selling of physical gold. There are also charges that could easily add up to a huge investment expense. This includes transaction fees, taxes, and insurance. And then there is the matter of storage for your physical gold. The value of your investment would depend on the value of gold in the market.
Buying mining stocks – you can indirectly invest in gold by buying stocks in mining stocks of companies that deal with gold. You can find these companies in the stock exchange. The downside of this kind of investment is that its prices do not depend solely on the price of gold. Share prices depend on the company. In times when there are operational concerns that crop up and affect the business, the value of shares could plunge even when the value of gold itself is on the rise.
Trading ETFs or futures – these are relatively inexpensive investments in gold. Putting money in exchange traded funds and futures allows you to ride the market fluctuations without risking a huge amount of money. Choosing which ETFs or futures to invest in should be done wisely. Looking a past performance of funds will give you an idea of how well these funds are being managed. Fund managers are more proactive in keeping the basket of investments in the ETFs at profitable levels. However, there are still risks of fund values going down. The good thing is that you do not have to lose money when this happens. You simply have to wait until fund values are up again to collect your gains. In the meantime, while share prices are low, you might want to think about increasing the number of shares you have in your portfolio.
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