Basics of Gold Investing

 Investing in gold can be an appealing option for those looking to diversify their portfolio, hedge against inflation, or seek a haven during economic uncertainty. Here’s a comprehensive guide on how to invest in gold, outlining the different methods and what investors should consider.

Understanding the Appeal of Gold

Gold has been valued for its rarity, beauty, and utility for thousands of years. It serves as a store of value and a hedge against inflation and currency devaluation. Historically, gold often maintains its value even in times of economic downturns, making it a popular choice for risk-averse investors.

Different Methods to Invest in Gold

1. Physical Gold

   • Gold Bullion: This includes gold bars and coins. Bullion can be purchased from dealers or banks and stored securely in a safe deposit box or a home safe.
   • Jewelry: Investing in gold jewelry can be another way, though the value can be affected by craftsmanship and retail markups.

2. Gold ETFs and Mutual Funds

   • Gold ETFs: These are exchange-traded funds that invest in physical gold or gold futures. They offer liquidity and can be traded like stocks.
   • Gold Mutual Funds: These funds invest in gold mining companies and other gold-related assets, providing exposure to the gold industry.

3. Gold Mining Stocks

   • Investing in companies that mine gold can provide exposure to gold prices. These stocks can offer leveraged gains compared to the price of gold itself but come with additional risks related to the mining industry.

4. Gold Futures and Options

   • Gold Futures: Contracts to buy or sell gold at a future date at a predetermined price. They require substantial knowledge and are often used by experienced investors for speculation.
   • Gold Options: These give the investor the right, but not the obligation, to buy or sell gold at a specific price before a certain date. They are less risky than futures but still require a good understanding of market movements.

5. Digital Gold

   • Some financial platforms offer the ability to buy digital gold, which is backed by physical gold stored in secure vaults. This method provides the convenience of trading gold without dealing with physical storage.

Factors to Consider When Investing in Gold

1. Market Conditions

   • Gold prices are influenced by various factors, including inflation, interest rates, currency fluctuations, and geopolitical events. Understanding these can help in making informed decisions.

2. Costs and Fees

   • Investing in physical gold involves costs such as premiums over spot prices, storage, and insurance. For ETFs and mutual funds, expense ratios and management fees should be considered.

3. Liquidity

   • Physical gold can be less liquid compared to gold ETFs or stocks, which can be quickly bought or sold in the financial markets.

4. Diversification

   • While gold can be a good hedge, it’s important not to over-concentrate your portfolio in gold. Diversification across various asset classes can help manage risk.

5. Storage and Security

   • Physical gold requires secure storage to prevent theft. This can involve additional costs for safes or vault storage services.

Steps to Start Investing in Gold

1. Set Investment Goals

   • Determine why you want to invest in gold and how it fits into your overall investment strategy. Are you looking for a short-term hedge or a long-term store of value?

2. Research and Choose the Right Form of Gold Investment

   • Based on your goals, risk tolerance, and investment horizon, decide whether physical gold, ETFs, mining stocks, or other forms are most suitable for you.

3. Find a Reputable Dealer or Brokerage

   • If purchasing physical gold, find a trusted dealer with good reviews. For ETFs and stocks, choose a reliable brokerage with low fees and good customer service.

4. Monitor Your Investment

   • Keep track of gold prices and market conditions. Regularly review your investment to ensure it aligns with your goals and market conditions.

Conclusion

Investing in gold can be a strategic addition to your portfolio, providing a hedge against inflation and economic uncertainties. By understanding the different methods of investing in gold and considering the associated factors, you can make informed decisions that align with your financial goals. As with any investment, due diligence and a well-thought-out strategy are key to success.

Most common first

There are literally thousands of ways to make money. The problem is to find that one method that works for you the best, one that fits your personality, values and interests.  The best way is the one that you understand.

Investing 

Stocks

This is probably one of the most common ways of making money.

One caveat is that you need some money to make money with stock investing. Also, problem is that stock market is very speculative and goes up and down. However, it is not that bad as it seems. Most common way, of course, is to invest money in particular stocks like GE, Microsoft, Google and other Fortune 500 companies. However, this is more long term investment, and you really could use help of a professional investment adviser, financial planner or a stock broker. On the other hand, you could find a proper discount stock broker and do it on your own. You can sign up for investment newsletters, financial periodicals, financial newspapers, magazines, like Wall Street Journal or Barron’s magazine (this one is highly recommended). Also, there are investment specific services or newspapers and web-sites.  This is more of a long-term way though and you do need money to make money with this method.

Recent trend is to invest in either distressed assets, such as companies that undergo bankruptcy, or invest in penny stocks. There are thousands of stocks that cost, well, pennies per share. The hope is that you invest a thousand of dollars in several of them, and one of them will shoot up later, making you 100 times what you invested. There penny stocks newsletters and web-sites online. However, you should be careful for scammers, as some of them own those stocks and just induce other people into buying and increasing value for the same penny stocks they invested in. It is a gamble, but you do not need a lot of money to try. You will need to find a discount stockbroker who can let you invest into those cheap stocks, because many do not offer such service. You will need to use brokerage account, trading account and money to invest.

Options

Instead of spending thousands you may have to spend only few hundred dollars instead if you decide to buy a stock option on the stock.

You can buy call option on a  stock, thus betting that stock will rise up in value beyond expected price, and then you can buy at the strike price that you initially anticipated, and sell at whatever premium the stock is trading for at the market. The difference is your profit. Or, you can purchase a put option, and bet that stock will go down.

You will also need discount stock brokerages for this service. Pros for trading options is that you do not have to invest thousands of dollars to bet that stick price will move up or down. Cons are that options are much more volatile than stocks, you can loose your money  much faster, and stocks options  have limited life – up to one year usually. You will need to use brokerage account, trading account and money to invest.

ETFs

This is my favorite way to invest. ETF stands for “exchange traded fund”, which is basically a fund which invests in other stocks, but is traded on exchange as a stock itself. It is easy to purchase and you are buying basically service of fund managers who constantly follow the market and shuffle portfolio to ensure that fund gains, and not looses, money. Not all ETFs guarantee profits, but you can check web-sites for listings of ETFs that are profitable and which have increased in value in the last 3, 6 months or a year. This is one of the safest ways to invest. With ETFs you can invest in stocks, commodities, real estate, any industry – because many ETFs are specifically designed to invest in those. You will need to use brokerage account, trading account and money to invest. And yes, some ETFs have options to trade.

Forex

Forex trading, or foreign currency trading, is another way some traders make money. Forex market has become very popular because of a possibility of using a leverage and making a profit. You do not need very large amount of money to trade foreign currency because of the availability of leverage. Forex is not the safest way to make money and is not for everyone. If you like starring all day at the charts and if you like to do some serious analysis of economic events that affect currency movements – then Forex is for you. Forex trading requires diligence and learning curve, but potential profits are very lucrative. I do know several Forex traders who consistently make good income, and I do know about people who tried and were never successful. Forex traders usually trade following currencies – US dollar, British Pound, Swiss Dollar, Yen, and other currencies. In order to trade Forex you need to have a good computer, then find Forex broker which can provide you with a good trading platform and decent leverage. Leverage is regulated in United States, but it is not regulated in many other countries.

Some Forex brokers offer managed accounts, but you need more money to invest. Also, some offer automatic trading, where computer trades your money while you sleep. I would not invest a lot of money into those as computers can make mistake.

Gold and futures trading

I will only briefly talk about it because this area is not very familiar to me. I do know a couple of successful futures traders and can tell you that they are financially well. But it takes time and dedication to learn the art. Again, if you like charts and economics – this is area for you.  Futures work like options – these are basically contracts to buy or sell a commodity at certain price at certain date in the future. For commodities and futures trading you will also need to find a decent broker to open a trading account. You can trade gold futures as well, and trading futures does not require large investment. However, if you want to invest long term in gold and other precious metals – I suggest investing in ETFs which invest in gold and silver.

Consulting

I can not omit this way of making a buck because it is so basic and widespread. Not all, but many of us face certain skills that might be useful to others. Those could be computer networking knowledge, car fixing knowledge, fitness and sports experience, actual industry knowledge, and you name it. There is often somebody who might need you help to go through maze of information. The most difficult part, of course, is to find clients. Basically, consulting is the same as having your own business and you will need to learn how to talk to people, how to use internet and social media, etc. There are few books that a good on this topic and you might find wealth of information on the internet as well. You need to watch out though, some of the consulting may require licensing (civil engineering, legal, medical, nutritional and fitness consulting in some states). Nevertheless, it should not discourage you.

Tutoring

This is different form consulting but similar at the same time – you are selling your skills and knowledge. If you know math well – it is kind of easy to find tutoring positions or tutor online as a private tutor. If you know science, accounting, finance and other complicated topics – it is also pretty easy. However, you may tutor as an artist or musician, as sports/bodybuilding coach and you name it. You need to identify your skills

I recommend to read more about the area in which you are interested. You can check any of the books links to which I posted throughout the text. I have read a number of them and they are actually useful more often than not. If you want to full recommended list on money making, business and entrepreneurship, click here: