6 smart ways to use gold in your investment portfolio
Interest in gold investing may have increased significantly over the last year, but the precious metal has long been valued by investors for the unique benefits it offers. For example, gold has long been considered a safe-haven asset, appreciated for its ability to preserve wealth and act as a hedge against economic uncertainties, which is a large part of why so many investors add it to their portfolios.
And, if you're considering a gold investment, this may be a smart time to do so. Not only are gold prices climbing, but persistent inflation continues to impact the value of the dollar. And, geopolitical tensions and high interest rates are also hurting the economy — but gold can help to protect against losses caused by these types of issues.
That said, there are many different ways to invest in gold, from buying gold bars and coins to preparing for retirement with a gold individual retirement account (IRA). But if you want to add gold to your portfolio, there are a few smart options that can help to enhance portfolio stability and potential returns.
Find out how a gold investment could benefit your retirement portfolio now.
6 smart ways to use gold in your investment portfolio
Here are a few smart ways to use gold in your investment portfolio right now:
Add physical gold as a tangible store of value
Investing in physical gold, such as coins or bars, is a classic and tangible way to add this precious metal to your portfolio. Holding physical gold can provide a sense of security and serve as a store of value.
However, it's essential to consider the storage costs and security concerns when opting for this method. Safe deposit boxes or secure home safes are common choices for storing physical gold — but in certain cases, you may need to use a gold custodian who specializes in storing and securing physical gold instead.
Learn more about your top gold investing options here.
Use gold ETFs for easy buying and selling
If you're seeking exposure to gold without the hassle of physical ownership, gold exchange-traded funds (ETFs) can offer a convenient solution. These funds typically track the price of gold and are traded on stock exchanges — just like any other security — making them easy to access with most digital investing platforms.
And, investing in gold ETFs provides liquidity and allows for easy buying and selling of gold assets, which can be a big benefit for the right type of investor. Moreover, gold ETFs often have lower expenses compared to actively managed funds, so this type of gold investment can be a more affordable way to add gold to your portfolio.
Invest in gold mining stocks for indirect gold exposure
Investing in gold mining stocks can be an indirect way to gain exposure to the precious metal while potentially benefiting from the performance of gold-related companies. Gold mining stocks are influenced not only by the price of gold but also by factors such as operational efficiency, exploration success and geopolitical stability in mining regions.
Gold stocks can be more volatile than other types of gold investments, but they can also result in higher returns. So, while it can make sense to invest in gold via gold stocks, it's crucial to research and choose mining companies with solid fundamentals and growth potential to reduce the potential risk and maximize your returns.
Use gold mutual funds to invest in diversified gold assets
Gold mutual funds work by pooling investment funds from various investors to purchase a diversified portfolio of gold-related assets. These funds will typically invest in a combination of physical gold, mining stocks and other gold-related securities, offering a good mix of gold assets in one fund.
By investing in a gold mutual fund, you can benefit from professional management and the expertise of fund managers who actively make decisions based on market conditions. That said, there are typically fees associated with this type of gold investment, so be sure to weigh the benefits and costs to ensure it's the right move for you.
Capitalize on price speculation with gold futures and options
For more advanced investors, gold futures and options provide a way to speculate on the future price movements of gold. Futures contracts allow you to buy or sell gold at a predetermined price on a specified future date. Options, on the other hand, give you the right (but not the obligation) to buy or sell gold at a specific price within a certain time frame.
While gold futures and options can be a potentially lucrative investment for the right person, it's important to note that trading in futures and options involves a higher level of risk. In turn, this type of investment typically requires a good understanding of the market.
Use gold certificates as an alternative to physical gold
Gold certificates are financial instruments that represent ownership of a certain amount of gold. These certificates are often issued by banks or financial institutions and provide an alternative to physical gold ownership.
Holding gold certificates allows you to benefit from gold's price movements without the need for storage or security concerns, so it can be an affordable, lower-risk way to add gold to your portfolio. However, it's crucial to choose reputable institutions to purchase gold certificates from, so be sure to thoroughly research the options before taking this route.
The bottom line
Incorporating gold into your investment portfolio can be a prudent strategy to enhance diversification and manage risk. Whether you prefer the tangibility of physical gold, the convenience of ETFs or the potential returns from gold mining stocks, there are various smart ways to leverage the unique properties of gold in your investment journey. As with any investment decision, though, it's crucial to conduct thorough research and assess your risk tolerance to ensure that your strategy aligns with your financial goals.
