What is the cheapest way to invest in gold?

Investing in gold has been a popular choice for centuries — and it has only grown in popularity in recent years. That's because gold offers numerous unique benefits to investors, allowing them to diversify their portfolios and protect against losses from other riskier investments. It can also act as a hedge against inflation and a means to preserve wealth, and both of those benefits can come in handy right now, with inflation remaining persistent and economic uncertainty looming. 

There are also numerous routes you can take to invest in gold. Not only can you invest in gold bars and coins, but you have other options too, like gold IRAs and even gold jewelry. And, as with any other type of investment, the potential benefits and downsides differ for each option.

The costs associated with each type of gold investment can also differ. But if you're looking for an affordable way to get started with gold investing, you may be wondering what your cheapest option is. So what is the cheapest way to invest in gold? Let's explore a range of gold investing options to determine which one suits your budget — and your financial goals.

Learn more about your gold investing options here.

What is the cheapest way to invest in gold?

There are a few different affordable ways to invest in gold, including:

Gold exchange-traded funds (ETFs)

Gold exchange-traded funds are a cost-effective way to gain exposure to the price of gold. These funds are designed to track the performance of gold and provide an easy way to invest in the precious metal without owning physical gold. 

And, the expenses associated with gold ETFs are typically lower than those of other investment options, such as buying physical gold coins or bars. That's because the management fees for most gold ETFs are reasonable, making them an attractive choice for budget-conscious investors.

Explore how gold investing could benefit you here.

Gold mutual funds

Gold mutual funds pool investors' money to invest in various gold-related assets, such as gold mining stocks, ETFs and even physical gold. These funds offer diversification within the gold sector and can be a cost-effective way to invest in gold, particularly if you prefer not to handle individual stock picking.

While gold mutual funds may charge management fees, they tend to be more affordable than actively managed funds. Just keep an eye on expense ratios when selecting a gold mutual fund to ensure that costs are kept to a minimum.

Gold mining stocks

Investing in stocks for gold mining companies can be another inexpensive way to gain exposure to the precious metal. Gold mining stocks are shares of companies that extract, process and sell gold. These stocks can be traded on stock exchanges and you can invest in them through a brokerage account.

The costs associated with investing in gold mining stocks are primarily brokerage commissions and any potential management fees if you invest in a gold-focused mutual fund. It's important to research and choose mining companies carefully, as their performance can be influenced by various factors, including the price of gold, production efficiency and geopolitical conditions.

Gold bullion coins and bars

While owning physical gold in the form of coins or bars may not be the cheapest way to invest in gold due to premiums associated with purchase and storage, it can still be a valuable option for some investors. When you buy physical gold, you have the advantage of owning a tangible asset that can be stored securely, providing a sense of security in turbulent times.

To minimize costs, consider purchasing gold bullion from reputable dealers and storing it in a safe and cost-effective manner, such as a bank's safety deposit box.

Gold savings accounts

Some banks and financial institutions offer gold savings accounts, allowing you to buy and sell gold in smaller quantities while bypassing the need to hold physical gold. These accounts typically charge storage fees, which can vary depending on the institution. 

While this option may not be completely fee-free, it provides an affordable way to invest in gold and is more liquid than physical holdings.

How to decide which gold investing option is right for you

Cost isn't the only factor to consider when deciding which gold investing route is right for you. Choosing the right method to invest in gold depends on your financial goals, risk tolerance and preferences. Here are some key factors to consider:

• Investment goals: Determine whether you are investing in gold for wealth preservation, portfolio diversification or capital appreciation. Your goals will influence the investment option that best aligns with your objectives.
• Risk tolerance: Consider how comfortable you are with the level of risk associated with each investment option. Gold ETFs and mutual funds tend to be less volatile than individual gold mining stocks.
• Time horizon: Your investment horizon plays a crucial role in selecting the right method. Short-term investors may prefer more liquid options like ETFs, while long-term investors may opt for physical gold to preserve wealth over time.
• Budget: Assess your available budget and the fees associated with each option. While some methods may have lower upfront costs, others may have ongoing fees, so it's essential to factor in all expenses.
• Liquidity needs: Evaluate how quickly you might need to access your investment. ETFs and gold savings accounts provide higher liquidity, while physical gold may require a longer selling process.
• Diversification: Consider how much exposure to gold you want in your overall portfolio. If you seek diversification, gold mutual funds and mining stocks can provide a broader range of assets.

The bottom line

Investing in gold doesn't have to be an expensive endeavor. Whether you prefer the ease of ETFs, the diversification of mutual funds, the potential growth of gold mining stocks or the security of owning physical gold, there are cost-effective options to suit your financial situation and investment goals. Just remember to research and compare the associated fees and risks of each method to make the best choice for your personal circumstances. Ultimately, the cheapest way to invest in gold will depend on your preferences and long-term financial strategy.