Gold investment is considered as a very safe and reliable tool of making money. By making a modest investment in gold, you can earn substantial profits, provided that you know the basics of this method of investment. There are a lot of methods through which you can invest in gold. You can buy gold bars, gold coins, gold ingots, gold ETF’s etc. You have to choose the method you feel comfortable with, besides the amount of investment you can initially make. Let’ take a brief look on these methods of investment;
Investing in Physical Gold bullion:
Physical gold is considered as a good gold investment vehicle. You can invest in physical gold coins, physical gold bullion etc. Gold bullion is regarded as a reliable source of investing money. Pooled accounts lend you a hand you so that you can effectively make investment in gold bullion.
1-Buying and storing physical gold:
Another method of gold investment involves the buying and hoarding of physical gold. It is considered as the most effective and reliable method of gold investment. You would really feel comfortable through this approach and will definitely earn a good amount of money. Like any other method, it has its own set of advantages and disadvantages. The disadvantages include the risk of stealing and the lack of instant cash money. Keeping gold in home proves to be a real headache for the investors. Also, if you get ensnared in some financially critical circumstances, you would really curse your investment. In order to get you gold converted in to cash, you have to wait for one or few day. So prior to investing, you should take these two points in to consideration.
2-Investing in pooled accounts:
Pooled accounts are one of the cheap and effective methods of buying and storing physical gold. In this scheme, you can purchase any amount of gold, while it remains in the custody of the gold dealer. You have bought the gold that is not allotted to you and it resides in the storage of dealer. You have full authority to sell it but you can’t take it to your home, unless you request it delivery. There would no gold bar or ingot carrying your name plate.
3- Buy physical gold but not storing it:
Buying physical gold is a reliable option of investment but the storage of this physical gold poses some serious threats like theft, liquidity etc. As an alternative, you can buy physical gold but you are not needed to store it, rather the gold bank does it for you. Your gold, that bears your very own particulars, is stored in the bank vaults and is audited regularly. If you purchase some more gold, it would be physically appended to your previous metal. These gold dealers like GoldMoney pay you money for storing your gold in their vaults and also for insurance. The disadvantage to this method is that you have to pay some monthly charges in the form of some ounces of gold. In worst cases, you can lose all of your gold if it has stayed in the bank vaults for a sufficiently longer period of time.
From the above it is clear that there are a lot of advantages and disadvantages of buying physical gold. The downsides of buying physical bullion include theft, liquidity and monthly charges. Whenever the rate of gold increases in the market, the worth of your physical gold increases and hence your profits. Also, this method is considered as the most reliable, cheap and yielding method of investment.
Investing in Gold equities:
As mentioned above, there are a number of methods of investing in gold. Instead of buying physical gold, you have various other options. These include investing in gold stocks, gold mines etc. These gold equities have proven themselves as a reliable source of making money. To buy these gold stocks, you have to have a brokerage account. It is an easy procedure accompanied with a very small initial investment. There are a number of stock schemes that offer you reasonable profits.
Advantages of Gold stocks
- One of the key advantages of gold stock is their somewhat independence from the actual price of the gold. These gold stocks don’t move hand in hand with gold. The stocks of companies like AEM, Barrick gold does not move in accordance with this precious metal. The reason behind this fact includes a number of interdependent market related factors. You will consider yourself lucky when your gold stocks face no significant ill-effects with the decreasing gold price. On the other hand, the rising price of gold will make your curse yourself.
- Mining companies like BHP Billiton produces a number of other metals in significant amount, besides gold. Hedging of such stocks can lend you a hand in dealing with gold rates. On the contrary, it also exposes you to greater risks from various other metals.
- As compared to physical gold, stock can be traded with much ease. They can be instantaneously bought or sold. With little efforts, you can find a dealer in open market and can effectively deal with him/her.
- Each and every type of gold investment, whether bullion or equity is subjected to market fluctuations. You can’t exactly predict the future trends of the market. Gold stocks are also subjected to such bullish or bearish trends that may not have substantial effect on the particular metal. For more clarity, you can see the Barrick’s recent situation.
- As you are dealing with a company, a lot of management risks are involved. A number of factors can affect your stock value like management shift, decision-making of management, political upheaval etc.
Disadvantages of Owning Gold Stocks
Investing in Gold ETFs –
In addition to gold stocks and physical bullion, there is another method of investment in gold. This method demands investment in gold ETF’s (Exchange traded funds). There are various ways through which you can invest in ETFs. You can buy and sell gold futures as well as you can invest in leveraged ETF’s. If you are a beginner, you should strictly adhere to the first option. The latter option is recommended for the veteran personnel. At first sight, leveraged ETF’s appear to be very simple and understandable but they require a deep understanding for successful investment.
Benefits of Holding Gold Bullion ETFs
The benefits of holding Gold ETFs include free storage, highly liquid assets, no monthly fees, no insurance etc. The advantages vary a bit, depending upon the type of ETF. These ETFs are available online on 24/7 basis. You can easily sale or buy ETFS at any time. On the other hand, if you want to have a possession of assets, then equity ETF is the most feasible option.
Shortcomings of Holding Gold Bullion ETFs
Like any other thing, Gold ETFs have its own set of drawbacks. First of all, there is no assurance that you physically owe a specific amount of gold. Also, you can’t have the delivery of the metal as you can only enjoy cash money. There are various hidden costs like managements costs, commissions etc. These costs can have a sound impact on your pocket. Besides that these ETF’s make you vulnerable to a good number of risks like turn over risks etc.
Being a novice in the field of gold investment, you are advised to invest in Gold ETFs. It will really help you in making good money. You have to decide on your own that either you would invest in companies like iShares or dealers like GLD. It would be better for you to invest in a number of companies, rather than investing in only one. It will lend you a hand in risk management. After gaining expertise in this field, you can then select a particular company for investment. In the end, whichever Gold equity you choose, you should have some sort of information relating to gold market. As gold is related with each and every sector, it lends you a hand in dealing with various market fluctuations.