Investing in gold can be as simple as going to a local shop in your city and picking up a coin or jewelry. Just like that, you own a valuable investment that you can actually hold in your hand.
Does that seem too simple? Buying gold without doing your research is easy, but not always the most effective way for an investor to maximize their return on investment. There are many different ways to buy gold, and even though buying bullion is among the most effective methods, there are often better ways than buying from local shops.
#1: Buy Gold Bullion
Buying gold coins and bars remains the easiest and safest way, but instead of going to a local shop, do your research online to find lower prices over premium. Local shops don’t necessarily keep track of up-to-date spot prices, something websites will do automatically. Save money by going online to find lower premiums and insured deliveries.
Gold coins and bars have a few standout advantages compared to other ways of owning the precious metal:
- No third-party risk when you keep it in a vault at home or in secured, allocated storage
- Coins and bars have high liquidity and they are easy to sell
- Coins and bars can be purchased as part of a tax-advantaged retirement savings plan in the U.S. and other countries
If you want to learn more about gold, check this out to learn the details.
#2: Gold ETFs
ETFs (Exchange Traded Funds) are a good way to own gold if you don’t want to have to store and insure it. Gold ETFs come with fees, but are generally considered more cost effective, unless you are frequently trading and paying brokerage fees.
The downsides of ETFs compared to physical gold include issues like counter-party risk (they are similar to mutual funds – it comes down to how much you trust the people managing the fund) and currency debasement. If you’re buying gold because you’re worried about currency debasement, an ETF won’t help you out.
#3: Gold Mining Stocks
Mining stocks are among the riskier ways to invest. They’re valued based on how well the companies are performing and profiting. That means efficiently mining gold. Unfortunately, mining costs are going up and they can’t be slashed if gold prices fall. Stock prices are extremely volatile and go down rapidly compared to minor price decreases in precious metals themselves.
#4: Gold Futures
Gold futures contracts are tough for regular investors who may want modestly-sized positions. Most futures exchanges require you to invest in contracts set at a certain size of either 50 or 100 oz., or around $60K to $120K. That’s more than most investors are willing to invest.
#5: Numismatic Gold Coins
One of the riskier ways of investing in gold is through numismatic coins. These are collectibles and by definition, they are coins that are worth more than their weight in gold. They derive this value from rarity, age, manufacturing details, and other factors that make them desirable for collectors. You may want to begin with silver coins if you are looking for numismatic coins.
Before you decide which way to buy gold, evaluate your personal priorities and which method best fits your goals.