Many people assume that gold is a good investment. In a tough economy where debt is king, investing in gold can be a safer investment than the stock market. Many economists suggest having a balanced portfolio in order to invest safely. This means that the ideal portfolio would include some bonds, stocks, cash and gold. Nevertheless there are a few things to know about investing in gold in order to get the most out of your money.
Gold Comes In Many Forms
Did you know that buying gold comes in many forms? There are three main types of gold that can be purchased for investments: physical yellow metal gold, gold mining equities and gold exchange-trading funds (ETFs).
When most people think of investing in gold they picture gold bars or coins, this is physical metal gold or gold buillion.
Gold mining equities are gold mining companies that have stock options available for public purchase. These are similar to other common stocks found in the stock market.
A gold ETF is similar to investing in a gold mining equity, in that they are also funds that are traded in the stock market. The key difference in gold ETF is that the fund is an investment in a conglomerate of companies, rather than a single entity like the gold mining equity.
Which Is Best?
Purchasing physical metal gold directly makes for an easy investment that is also easily liquidated through sale to a business or other individual. However, physical metal gold often comes with additional costs for theft protection, insurance and fees to store the gold. The tangible nature of physical metal gold is part of its appeal, but also makes the investment more time consuming.
Gold mining equities are fairly easy investments for low volume or first time investors. The stocks are easily bought and sold on the stock market, and most of the trading can be done by the investor themselves without the need for a broker. These stocks are easily diversified and leave opportunity for investing a portion of the funds in multiple single entities. Like any stock, they are subject to the rise and fall of the stock market itself, making it more of a risk than physical metal gold.
Gold ETFs are typically for experienced or higher volume investors, as these stocks require more attention and management to make a profit. Trading ETFs often require a broker or experienced trader, which costs the investor additional money. The nature of these stocks make them inherently more risky than other types of gold investments.