How to Invest in Gold
Gold is one of the commodities that investors perceive as a haven, especially when the stock market becomes highly volatile. Gold has the potential for a good return and is liquid. Liquidity is an investment term that describes the ability to easily exchange a commodity for cash.
But before you start investing you must first know how to invest in gold, and practically, there are different ways to invest in gold. In this article, we will show you how to invest in gold, the 4 major ways.
Is Good a Good Choice for Investment?
Gold has become the choice for many investors for several reasons which include:
Gold offers opportunities for decent returns.
Gold is liquid; you can easily convert them to cash.
Gold offers low correlations.
Gold is a defensive store of value.
Offers opportunity for diversification
How to Invest in Gold: 4 Ways to Invest in Gold
Here are five different ways to invest in gold:
#1. Gold Bullion
Investing in gold bullion gives you the feel of owning physical gold. Gold bullion comes in the form of bars and coins which you have to wait for the price to rise to make a profit.
You can purchase gold bullion through an online dealer, a local dealer, or a collector. However, a major drawback to this method of investing in gold is the cost of safeguarding and insuring the physical gold.
#2. Exchange-Traded Funds (ETFs)
Investing in gold ETF is a cheaper and less stressful way of investing in gold. By investing in a gold ETF, you don't need to own physical gold, yet you have exposure to the commodity. A gold ETF tracks gold - it matches the price performance of gold and then subtracts the ETF’s annual expense ratio.
Another major benefit of investing in gold through an ETF is liquidity; you can easily exchange an ETF at the market price. Gold ETFs are more liquid than physical gold, you can trade the fund once the market is open.
You can also invest in Gold miner ETFs. These ETFs expose you to the biggest gold miners in the market. You can own individual miners and still benefit from diversification. Diversification reduces the risk from the underperformance of a single miner because funds are diversified across sectors.
#3. Gold Futures
With investing in gold futures, you can speculate on the price - whether they will rise or fall. However, the major benefit of investing in gold futures is that it offers a large amount of leverage. This means that with a limited amount of money you can own a substantial amount of gold futures. With this, you stand a chance to make a fortune if the gold futures go your direction.
#4. Investing in Mining Stocks
The last on how to invest in stock is through stock mining companies (companies involved in the production and exploration of stocks). Mining stocks allow investors to profit from their investment in two ways. You can make a profit when there's an increase in the price of gold and if the company raises production over time.
Learning how to invest in gold is the first step you should take before committing your money. And now that you know how to invest you can choose which method of investing is best for you.