How to invest in gold for beginners

Like any type of investment asset, investing in gold can pose unique challenges, especially for beginner investors. And while the challenges can vary for each investor, one of the main hurdles is due to the wide range of gold assets available, all of which differ in their benefits and possible downsides. Still, investing in gold can prove advantageous for many investors, even with the potential hurdles. After all, not only can gold act as a hedge against inflation, but it can also serve as safe-haven asset that protects your wealth in other ways. 

The price of gold has also been on a bull run since early this year, which is one of the main reasons why so many investors have been buying into gold recently. More investors are trying capitalize on the possibility of quick (and longer-term returns) right now, which is simple considering that physical gold is widely available to those who want to buy in. Even big-box retailers like Costco and Walmart are now selling gold bullion. 

So while there may be a learning curve involved in investing in gold, you have several options for getting started. And many of those options are compelling choices for new investors. 

Learn more about this unique investment opportunity here now.

How to invest in gold for beginners

Here are four different gold investments to consider when starting out.

Gold IRAs

If you want to diversify your retirement portfolio, you can opt to transfer a portion of your existing individual retirement account (IRA) to a gold IRA.

You may choose a traditional gold IRA so your money grows on a tax-deferred basis over time, or you could opt for a Roth gold IRA which you'll fund with after-tax dollars. As such, you won't owe taxes on distributions you take during retirement. Also, If you run a small business or are self-employed, a Simplified Employee Pension (SEP) gold IRA may be a viable option. You could set up SEP gold IRAs for yourself and your employees.

Beginning investors may benefit from working with a reputable gold IRA company to set everything up so that you properly adhere to IRA regulations. The company can help you appoint an IRA-approved custodian and the depository to store the physical gold in your IRA. 

Learn more about your gold IRA options today.

Physical gold

Physical gold is available in many forms, including gold bars and gold coins. You may enjoy the look and feel of physical gold, but you'll also have to store and insure this precious metal, which is important to keep in mind.

The return on investment with gold depends on the asset's price rising or falling. You can buy physical gold in many ways, including via reputable gold dealers, private collectors and pawn shops. The price you pay will depend on the purity of the gold in the bar or coin, and the price of gold at that time.

As a reference, gold bullion is most commonly sold in one- or 10-ounce bars, with gold currently hovering between $2,300 and $2,400 per ounce. So, it may be easier to invest in gold coins, which are available in quantities of one ounce or less.

Gold futures

Gold futures are another way to invest in gold, although they are highly speculative and can be risky for beginning investors. With gold futures, an investor and seller enter into a contract where the buyer agrees to purchase a certain amount of gold at a specific price and date, regardless of market conditions.

That means if you're holding the investment and the price is dropping just before the contract's expiration date, you could lose much (or all of your investment). 

If you're considering investing in gold futures, you must understand how it works and the risks involved. The brokerage firm you work with may require you to sign a form indicating as much before opening up your account.

Gold ETFs

If you're new to gold investing, you may enjoy the familiarity of stock market investing by owning some stocks in gold mining companies. With this type of investment, your profits can be based more on the company's performance rather than the price of gold. But in theory, you could still profit if the price of gold rises and the company's stock increases as inventory becomes more valuable. 

Your gold investment could also grow if the company produces more gold or can mine at reduced costs. Conversely, you could lose money if the company mismanages its operations.

Gold exchange-traded funds (ETFs) are a popular way beginners can start investing in gold. With ETFs that exclusively hold gold mining companies, you can get exposure to gold and add diversity to your portfolio. Whether you invest in gold mining companies individually or through an ETF, you can buy these investments through an online broker.

There are multiple gold companies that can help you start investing in the precious metal. 

The bottom line

Before you start the process, you should know that investing in gold is not typically a way to grow your money. Over time, the stock market generally outperforms the price of gold. It can, however, be an effective way to protect it against volatility in the large economic climate.

Owning some gold is one way to diversify your portfolio (experts typically recommend limiting it to 5% to 10% of your portfolio). If you want to invest in gold, consider consulting with a financial advisor who can help you determine how to incorporate it into your overall investment strategy. Get started here now.