Looking for a simple and safe way to own the yellow metal? Learn how to protect and increase your wealth with gold.
Adding gold and other precious metals to your portfolio is a well-known way to diversify your investments. Including gold in your investments improves your long-term financial stability and acts as a hedge against currency depreciation.
But deciding how to invest in gold can sometimes be tricky.
When it comes to acquiring the metal, investors typically take one of these four popular approaches:
- Exchange-Traded Funds – Trusts based on the price of gold in the stock market. Similar to a mutual fund, but traded in a stock exchange like an ordinary stock
- Retirement Accounts – Tax-free or tax-deferred accounts that allow you to save your financial assets for the future
- Mining Shares – A way to invest in gold by purchasing a partial ownership in the mining companies that excavate and supply the precious metal market
- Physical Ownership – Gold in the form of bullion or coins. Retains value despite the fluctuations of paper currencies like the U.S. dollar
Each option has various strengths and weaknesses. Ultimately, it is up to individual investors to decide which approach (or approaches) best suits their needs.
Exchange-traded funds have grown in popularity in recent years, particularly among short-term investors. With an ETF, you don’t own physical gold, but purchase a portion of the rights in a mutual fund that invests in gold.
A huge downside to gold ETFs are the high transaction and management fees. If you buy an ETF like SPDR Gold Trust (GLD), about 40 percent of the value of your investment is spent on management fees every year. Also, ETFs offer no protection from volatile markets and have no inherent value.
Individual Retirement Accounts
Acquiring gold through IRAs is not a new investment strategy, but it is quickly growing in popularity thanks to affordability and tax incentives. There are several different types of IRAs, including Roth, Traditional and Rollover, each with specific eligibility requirements and rules.
Self-directed IRAs let investors choose which asset class they want to invest in and how much. For instance, if you want precious metals to make up 10 percent of your portfolio, you can set that up with a self-directed IRA. You can further protect your portfolio from market changes by subdividing your holdings into silver, platinum and palladium.
To learn more about gold IRAs, read Securing Your Retirement Through Precious Metal IRAs in the Knowledge Center.
If you have a hankering for risk, you can always buy stocks in gold mining companies. This approach to gold ownership allows investors to buy and sell gold quickly. However, it is highly unpredictable.
Gold hunting and mining is a costly endeavor, and investors run the risk that a junior operation will drain all of its resources before striking a stockpile of gold — which happens regularly.
If you do decide to go this route, make sure to do your research and minimize your risk by investing in an established mining company that only digs on proven reserves.
Physical Bullion and Coins
By far the safest way to invest in gold is to take direct ownership.
Unlike stocks and funds, physically owning gold makes it a tangible investment you can touch and see. In most cases, your investment is not reported to the U.S. Government, making it as private as cash.
Physical gold has inherent value, which makes it immune to the volatility of paper stocks, while offering protection from bank failures. In general, gold has an inverse relationship with paper currency: when the dollar does poorly, the value of precious metals tends to skyrocket.
For the long-term investor interested in securing a hedge against market depreciation and volatility, buying physical bullion beats ETFs and stocks every time.
To learn more, read 4 Benefits of Investing in Physical Gold in the Knowledge Center.
Invest in Gold Today
Whether you want .9999 1 kilo gold bars for easy stacking, or highly coveted American Gold Eagles, Provident Metals carries gold bullion in all shapes and sizes — to fit any budget.