How To Buy Gold In 2021
There are two main ways for people to invest in gold. They can purchase physical gold in the form of bullion bars, coins, and jewelry. Alternatively, they can invest in financial instruments: whether by purchasing shares of mutual or exchange-traded funds or by trading futures and options.
Our guide on how to purchase gold in 2021 will help you understand your different purchase options and what to look out for when investing.
In Case Of Etf Liquidations
The closing, or liquidation, of an ETF is usually an orderly process. The ETF issuer will notify investors, generally three to four weeks in advance, about the date when the ETF will stop trading. That said, an investor with a position in an ETF that is being liquidated still has to decide on the best course of action in order to protect his or her investment. Essentially, the investor has to make one of the following choices:
- Sell the ETF shares before the “stop trading” date: This is a proactive approach that may be suitable in cases where the investor believes that there is a significant risk of a substantial near-term decline in the ETF. In such cases, the investor may be willing to overlook the wide bid-ask spreads that are likely to be prevalent for the ETF, due to its limited liquidity.
- Hold on to the ETF shares until liquidation: This alternative may be suitable if the ETF is invested in a sector that is not volatile and the downside risk is minimal. The investor may have to wait a couple of weeks for the issuer to complete the process of selling the securities held within the ETF, and distributing the net proceeds after expenses. Holding on for the liquidated value eliminates the issue of the bid-ask spread.
How Can I Invest In Gold As A Beginner
November 15, 2021 by Eric
How can I invest in gold as a beginner? Is gold a viable investment option for me? Should I get started right away, or should I simply forget about trying to invest in gold? Welcome to yet another interesting article in which I will take you through the basics of investing in gold as a beginner. With the information presented herein, it is my hope that you will be better placed to get started on the right foot . Lets hop right into it.
P.S.
See Gold Retireds top-5 recommended Gold & Silver IRA Companies
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Ways To Invest In Gold
Now that you understand why gold is a good investment, you may be wondering how to get started. Well, its actually easier than ever to invest in gold because there are so many options available.
However, this can cause many new investors to feel overwhelmed and unsure of how best to start. If youre new to investing in gold, here are five solid options you can consider.
Is Gold A Good Investment
The answer to this question highly depends on your motivation to purchase this precious metal. Generally, if you are looking to make some quick money in the short-term horizon, not all approaches to investing in gold will benefit you. In such a case, I would actually not be a strong proponent for gold, unless you have some large volumes of money and are willing to take a risk.
If you are, however, looking for an investment asset to hold over the long-term horizon, then gold is worth considering. Gold has a couple of benefits, including:
- It is a great hedge against inflation
- You can use it to diversify your investment portfolio
- Gold can protect your portfolio from the effects of the declining U.S. dollar
- It is negatively correlated with the stocks market .
All the above benefits cumulatively make gold the go-to asset for any investor who is looking for safety and stability.
N.B: The above benefits can only be reaped by those who purchase physical gold through a gold IRA.
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A Brief History Of Gold
In order to fully understand the purpose of gold, one must look back to the start of the gold market. While gold’s history began in 2000 B.C, when the ancient Egyptians started forming jewelry, it wasn’t until 560 B.C. that gold started to act as a currency. At that time, merchants wanted to create a standardized and easily transferable form of money that would simplify trade. The creation of a gold coin stamped with a seal seemed to be the answer, as gold jewelry was already widely accepted and recognized throughout various corners of the earth.
Following the advent of gold as money, its importance continued to grow throughout Europe and the U.K., with relics from the Greek and Roman empires prominently displayed in museums around the world, and Great Britain developing its own metals-based currency in 775. The British pound , shillings and pence were all based on the amount of gold that it represented. Eventually, gold symbolized wealth throughout Europe, Asia, Africa, and the Americas.
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Should I Invest In Gold Or Diamonds
Just like gold investors can choose to invest in diamonds by buying these physically, investing in companies in the diamond industry or investing in funds based on the value of diamonds or assets associated with the diamond industry. However, unlike gold that measures its worth based on its weight using a set spot rate, diamonds are not homogenous and each one has to be individually assessed for their worth. Variations in shape, colour and clarity can impact their value as an investment. Diamonds are also not exempt from VAT unlike qualifying gold investments.
Drawbacks Of Physical Gold
- Expensive to hold. Storing gold at home carries enormous risks of theft or loss. Keeping it in a commercial facility incurs storage costs, often based on the size and value of the holdings . If you’re not using a professional storage facility, you’ll want to insure your gold, too another ongoing charge.
- Illiquid. Physical gold can’t be sold with a press of the button or a call to a broker. Even with dealers acting for you, a sale can get days or weeks to settle, plus you have to arrange for shipping.
- Does not produce income or profit. A $1,000 investment in bullion buys $1,000 period. Physical gold doesn’t generate interest or dividends. The only potential for appreciation is if there’s a jump in prices that lets you sell at a profit .
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Buy Gold Mining Stock
This is a more indirect way to get in on the proverbial gold rush. Instead of directly buying gold or gold ETFs, you could invest in the companies mining the gold. The reason why investors might choose to do this is because it offers more potential for growth than physical gold. One gram of gold is going to remain a gramwhether ten, fifty, or a hundred years go by. A company, however, has the potential for growthand so does its stock price. You can also own gold mining stock by investing in a mutual fund that includes this kind of stock.
However, choosing this option means youll have to deal with the risks involved in buying stock, and stocks are notoriously volatile. Your investment will be vulnerable to the management of the company, and if youre interested in sustainable investments, then mining stock might not be the right pick for you.
Why Invest In Gold
So whats the deal with the shiny metal anyway? There are so many exciting investment opportunities by now, why would people still go back to something as archaic as gold? Well, one of the main reasons why gold is still a popular asset is because of diversification. By having a range of investments that cover different areas, youre less likely to lose all of your money if one sector happens to take a nosedive. Gold is one of those sectors that it can be useful to keep money in.
Piggybacking off of that, gold has historically performed well during times of market turmoil, since its a commodity that tends to maintain its value even when as other commodities like paper currency decrease. Its why investors tend to choose gold when currencies start to decline, as well, which in turn causes the price of gold to rise, which in turn attracts even more investors.
Its also seen as a good investment to have during times of geopolitical instability . Gold is also seen as a good hedge against inflation, since its price tends to rise alongside rising costs of living.
Another argument made by gold lovers? As emerging markets across the world are producing more investors, the demand for gold will supposedly continue to grow, while the fact that it takes a while for gold supplies to be replenished and its a finite resource means that demand willagain, supposedlycontinue to outpace supply.
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Whats The Best Gold Investment Strategy For Beginners
If youre new to investing in gold, then you may be wondering what the best option is. The truth is, there are no perfect investment strategies, so youre going to have to evaluate the risks and rewards of each one.
Consider what your goals are and why you want to invest in gold. If your only strategy is to protect yourself against inflation, then buying physical gold may be the right choice for you. Whereas, if you want an income-producing asset, then gold stocks or mutual funds may be a better choice.
Just keep in mind that gold should only be one part of your total investment strategy. Ideally, it will be less than 10% of your total portfolio. That way, youll diversify your assets without putting too much at risk.
How Gold Is Priced
All forms of gold investment are priced in a similar way, as the price you are charged is based on the premium of the product. This is the percentage which is charged for the product over the gold price of the metal which it contains. Due to economies of scale, smaller products tend to cost slightly more to manufacture, package and distribute than larger ones. This means that the premium on smaller products tends to be more. So, even though a 1g gold bar would be cheaper than a 100g gold bar the actual percentage charged on the smaller bar, over the price of the gold it contains, is slightly higher. Put simply, it would be cheaper to buy a single 100g gold bar than it would be to buy 100 x 1g gold bars. Even though you would get the same amount of gold, as it costs more to manufacture 100 smaller bars, the company charges a higher premium for them at the time of sale.
Similarly, as the costs to the retailer are less, digital products, such as from The Royal Mint, carry a lower premium as the costs for the retailer to store the product and distribute it digitally are less than those associated with physical coins and bars.
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Streaming And Royalty Companies
For most investors, buying stock in a streaming and royalty company is probably the best all-around option for investing in gold. These companies provide miners with cash up front for the right to buy gold and other metals from specific mines at reduced rates in the future. They are like specialty finance companies that get paid in gold, allowing them to avoid many of the headaches and risks associated with running a mine.
Benefits of such companies includes widely diversified portfolios, contractually built-in low prices that lead to wide in good years and bad, and exposure to gold price changes . That said, none of the major streaming companies has a pure gold portfolio, with silver the most common added exposure. So you’ll need to do a little homework to fully understand what commodity exposures you’ll get from your investment. And while streaming companies avoid many of the risks of running a mine, they don’t completely sidestep them: If a mine isn’t producing any gold, there’s nothing for a streaming company to buy.
Five Things You Need To Know About Gold
2 minute read
Gold is often perceived as a safe haven during turbulent times, although it can itself be very volatile. We look at five things you need to know about the precious metal.
Who’s this for? All investors
The value of investments can fall as well as rise and you could get back less than you invest. If youre not sure about investing, seek professional independent advice.
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Invest In Gold Etfs And Gold Mutual Funds
Investing in gold ETFs and mutual funds can provide you with exposure to golds long-term stability while offering more liquidity than physical gold and more diversification than individual gold stocks. There are a range of different types of gold funds. Some are passively managed index funds that track industry trends or the price of bullion using futures or options.
The SPDR Gold Shares ETF , for example, holds physical gold and deposit receipts, and its price tracks the price of physical bullion. VanEck Vectors Gold Miners ETF , on the other hand, is a passively managed fund that tracks an underlying basket of stocks of gold mining and refining companies.
Gold mutual funds like Franklin Templetons Gold and Precious Metals Fund are actively managed by professional investors. These funds aim to beat the returns of passively managed index funds. In exchange, they charge relatively high expense ratios.
Just remember, like gold stocks you arent buying gold, just paper that is theoretically backed by debt or equity of mining companies or futures and options contracts for physical bullion. This means the value of gold mutual funds and ETFs may not entirely match up with the market price of gold, and these investments may not perform the same as physical gold.
Gold Investment In Nigeria
Gold is among the few malleable precious metals stones that is always in style. Thats why, notably during a recession or a terrible economy, many people invest in gold to protect their wealth. Gold is expensive, and its value increases gradually. Theyre used in a variety of jewelry, devices, offices, home appliances, and other products. And can be used as legal tender as well.
Gold is a low-risk investment that pays out handsomely, particularly when held for a lot longer. Now after you realize how safe gold investments are, check out some of the options for gold investing in Nigeria.
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Buying Gold Mining Stocks
If you can’t get your hands directly on any gold, you can always look to gold mining stocks. Keep in mind however, that gold stocks don’t necessarily move in concert with bullion prices, because mining companies succeed or fail based on their individual operating performance and how they deploy their capital and generate profits. You don’t have the security of physical possession of the metal if the companies you buy are unsuccessful.
Gold Exchange Traded Funds
Gold has exchange commodity funds which you may trade in, very much like the stock market. You will not have tangible possession of the gold in the manner that you do with FX and cryptocurrency.
If youve a limited amount of money, one of the finest ways to invest in gold in Nigeria is through Gold Exchange Traded Funds. You also dont have to worry about the gold being secure because it isnt physical.
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Should You Invest In Gold
If youre concerned about inflation and other calamities, gold may offer you an investing safe haven. Though in the shorter term it can be just as volatile as stocks, over the very long term, gold has held its value remarkably well.
Depending on your own preference and aptitude for risk, you may choose to invest in physical gold, gold stocks, gold ETFs and mutual funds or speculative futures and options contracts. Regardless of the form of gold you choose, most advisors recommend you allocate no more than 10% of your portfolio to it.
Any form of investing carries risks. Gold is no different. But the idiosyncratic gold market isnt forgiving and takes a long time to learn. This makes gold ETFs and mutual funds the safest choice for most investors looking to add some of golds stability and sparkle to their portfolios.
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How To Invest In Gold
Part of gold’s appeal comes from its physicality: You can touch it and hold it. You can’t really hold a share of Johnson & Johnson stock. Way back in the day, ancient civilizations traded in gold because its malleability allows it to be easily turned into coins or jewellery.
Although its historically been a volatile market, gold has also proven to be a durable investment. Here are some tips on how to get started:
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Gold Certificates As An Investment
You can also opt to buy gold certificates. These are certificates that you own certain pieces of gold that are stored at a company. You dont need to worry about storing the gold and still have a gold investment. When buying gold certificates you need to be very careful to buy from a reliable backer. The number of companies that offer gold certificates is very limited.
