Is buying physical gold worth it for investors?
Savvy investors are always searching for ways to diversify their portfolios and protect their investments from market turbulence. And with the past few years plagued by everything from interest rate hikes to persistent inflation, gold's reliable returns and positive historical performance make it a particularly appealing option for some investors today.
There are many ways to invest in gold — but the one investors often turn to is physical gold in the form of gold bars and coins. It's a straightforward, easy-to-understand option to add the precious metal to your portfolio and enjoy the many benefits gold provides.
But is it the best way? That depends on your investing goals and preferences. To decide if it's right for you, it's important to understand the advantages and disadvantages of this particular type of gold investment.
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Is buying physical gold worth it for investors?
If you're thinking of investing in physical gold, here's what you need to know to make an informed decision.
Pros of investing in physical gold
Gold is a smart investment for many reasons. Here's why physical gold in particular can be beneficial:
- Tangibility: One of the primary benefits of investing in physical gold is that it's a tangible asset investors can hold in their hands, unlike more-abstract assets such as stocks. If you value the peace of mind this brings, gold bars and coins could be a good investment for you.
- Collectibility: Coin collectors can enjoy the fun and satisfaction that comes from searching for and obtaining rare and valuable coins. This can make investing not just a lucrative pursuit but also an entertaining one.
- Global acceptance: Gold is an internationally recognized currency, commodity and asset, making it easy to sell for cash anywhere in the world. This makes it a highly liquid asset, which can useful in the event you suddenly need extra funds.
- Simplicity: Understanding the ins and outs of assets like stocks and exchange-traded funds (ETFs) can feel overwhelming to some investors. Physical gold, on the other hand, is relatively easy to understand and purchase. You can buy it online or from any number of local dealers.
Cons of investing in physical gold
While there are many reasons physical gold is worth buying, there are also some drawbacks to consider.
- Higher costs: Physical gold can come with high premiums since it must be produced, shipped and stored. This can eat into your returns. To make sure you're getting the best deal, look up the current price of gold so you can evaluate dealer prices.
- Storage considerations: Physical gold can be difficult to store and protect. Depending on the size of your investment, you'll need to either buy a fireproof home safe, rent a safe deposit box at a bank or credit union or work with a third-party custodian to keep your gold secure. This adds to your total investment cost.
- Insurance cost: In addition to storing your gold securely, you must insure it. Your homeowners insurance likely won't cover gold stored in a home safe, and banks usually don't insure safe deposit boxes. Purchasing this insurance is one more cost to consider.
- Potential scams: Physical gold can be counterfeited or misrepresented as pure when it's not. It's essential to familiarize yourself with the signs of a scam, choose a reputable dealer and know what to look for when evaluating physical gold.
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The bottom line
Physical gold can be a good investment for those seeking to diversify their portfolio and protect their wealth. However, it is not a one-size-fits-all solution and must be considered in the context of your individual investment goals and preferences.
Should you decide you'd rather invest in gold a different way, you have plenty of options to choose from, including gold stocks, gold ETFs and gold IRAs. With careful consideration and analysis, you can determine the most effective way to integrate physical gold into your portfolio.
