Buying gold? 4 things you need to know
Gold has long been seen as a smart way to safeguard — and often grow — your wealth. It can also help you diversify your portfolio and reduce your overall investment risk.
But gold investments aren't right for everyone — and there are also many ways to go about it.
Are you considering gold as an investment vehicle? Take multiple factors into consideration or reach out to a gold expert who can help guide you through the process. Use the table below to get started.
4 things to know about buying gold
As you embark on the gold-buying process, it helps to understand the advantages of this unique investment. Here are four you should know.
- You have many options
- Gold can be a good hedge against inflation
- Gold's generally considered safer than other investments
- Gold can help you diversify your portfolio
You have many options
There's a chance you're already invested in gold. As Edward Karr, founder of U.S. Gold Corp., explains, "There are many ways an investor can get exposure to the gold industry. Most people have exposure to the gold industry already and they might not even realize it — through their wedding rings, jewelry and even teeth."
But owning physical gold — such as coins, bars, bullion or jewelry — is only one way you can invest in this precious metal. You can also purchase stocks in gold mining companies or buy shares in gold Exchange Traded Funds (ETF).
"An ETF is a security that tracks the price of gold, silver or other commodities," says Harry Turner, founder of The Sovereign Investor, an investment education website. "So when you buy an ETF, you're buying a piece of a pooled investment that holds physical gold bullion. This can be a good way to get started if you're new to investing in gold because it's relatively easy and low-risk."
If you do opt for physical gold, you'll need to go through a reputable dealer. You will also need to determine what type of gold you want, how much of it to purchase and where to store it (you can store it yourself or pay to have it stored in a secure depository).
Speak to a gold expert today who can help you. You can request a free wealth protection kit with more information, too.
Gold can be a good hedge against inflation
The value of gold and the value of the U.S. dollar tend to have an inverse relationship. When one rises, the other falls and vice versa. This is because when the dollar weakens, investors tend to flock to the safety of gold, which sends its value upward.
This is why gold is largely considered a good hedge against inflation. As the dollar weakens, gold increases in value, helping your wealth grow — rather than shrink — during inflationary times.
"Over time, the value of gold tends to rise as the purchasing power of fiat currencies falls," Turner says. "This is because, unlike paper money or other types of investments, gold is a physical asset that can be stored and traded. As long as people continue to see it as a valuable commodity, the price of gold is likely to remain a good hedge against inflation."
Gold's generally considered safer than other investments
Compared to other types of investments, gold — at least physical gold — is considered one of the safest options to put your money into. This is due to many reasons, but its scarcity and long-term stability have a lot to do with it.
"Gold has been used as a form of currency and trade for centuries, and it is still used today as a global reserve currency," Turner explains. "This makes it an extremely stable investment that is not tied to the performance of any particular economy."
Gold is also less volatile than the stock market and other regularly traded investments, and, in many cases, it can have fewer tax implications, too.
"It's less likely to fluctuate in value with respect to other investments," Turner says. "And because it is a physical asset, gold is not subject to the same risks as stock or bond investments."
Gold can help you diversify your portfolio
Finally, gold can help you diversify your portfolio. If your money is heavily invested in real estate, the stock market or some other type of investment, that puts you at risk if one of those sectors takes a turn.
Putting your money into gold can help you spread those risks and ensure you still have a wealth-building tool should those other markets fail.
According to Karr, ensuring just 5 to 10% of your investments are devoted to physical gold or gold mining equities "could reduce an overall portfolio's risk and potentially increase the long-term returns."
What's best for your money?
Despite its benefits, gold isn't the right investment for everyone. If you're not sure whether gold fits into your budget or long-term wealth strategy, talk to a financial adviser, tax professional or investment expert. They can help you make the right decision for your portfolio, budget and individual goals. Or request a free wealth protection kit with more information.
