Investing in gold? Look for these 3 things

Gold is a smart investment for a number of reasons. It provides reliable returns, diversifies your portfolio and acts as a hedge against inflation. It's especially beneficial in times of economic trouble when it maintains its value as other assets falter.

If you're thinking of investing in gold, there are some considerations to keep in mind to choose the best option for you. In this article, we'll explore what you should look for to get the most from your investment dollars.

Learn more about gold investing by requesting a free information kit here.

Investing in gold? Look for these 3 things

Consider these three things when creating a gold investment strategy.

Investment type

There are many different ways to invest in gold, each with its own advantages and disadvantages:

• Physical gold (such as coins or bars)
• Gold IRAs (which come in three types: traditional, Roth and SEP)
• Gold ETFs
• Gold mutual funds
• Gold stocks
• Gold futures

As you weigh these types, take the time to understand how each one works to choose the one that's best for you. Features to compare include:

• Fees 
• Storage costs
• Liquidity
• Tax consequences
• Any restrictions (such as contribution limits)

Start exploring your gold investment options by requesting a free investors kit today.

Tax treatment

Taxes can eat into your returns with any investment, so it's important to know how any investment you're considering will be taxed. How gold is taxed depends on two factors: time frame and investment type.

If you sell a gold investment after owning it for less than 12 months, the IRS classifies it as a short-term capital gain and taxes it at your normal income tax rate. If you sell it after owning it for 12 months or more, it's considered a long-term capital gain and taxed at 0%, 15% or 20%, depending on your income level.

Note that this only applies to gold stocks and ETFs that invest in mining companies. Physical gold — and stocks and ETFs that invest in physical gold — are subject to the collectibles tax rate, which is as high as 28%. Gold futures, meanwhile, have a 60/40 rate, with 60% taxed as long-term capital gains and 40% taxed as short-term capital gains.

Finally, IRAs have their own tax benefits. Depending on the type, your money will be taxed either when you contribute it or when you withdraw it.

Timing

While gold tends to hold value steadily over the long term, it's subject to short-term fluctuations like most assets. For example, in the past five years, the lowest price of gold was $1,176 in August 2018, according to BullionByPost. The highest price was $2,067 in August 2020. Gold prices are nearing record levels again and are poised to go even higher.

"From an investor perspective, we didn't see the peak yet, and the peak may be much higher than $2,000 - $2,500 in the long term," Baruch Silvermann, investor and CEO of The Smart Investor, previously told CBS News.

At the same time, we're living with high inflation and an impending recession. Gold historically performs well in these environments, so investing now could help your portfolio weather any economic storms, especially if gold's value only continues to rise.

The bottom line

Gold can be a valuable addition to any portfolio. But, as with any investment, it's important to know what to look for. By comparing different investment types, knowing how your investment will be taxed and timing your purchase right, you can maximize your earnings and minimize your costs.

Request a free investment guide here and learn how you can invest in gold today!