CHRISTOPH BURGSTEDT/SCIENCE PHOT
While the inflation rate has cooled from recent highs, the issues with stubborn inflation continue for now. And as that inflation persists, many investors are looking for investment options, like gold, that can help protect their portfolios. While investing in gold can pose unique challenges, due in large part to the range of gold assets available, doing so can prove advantageous for many investors.
That’s a large part of why so many investors have been buying into gold recently. Late last year, for example, gold investments reached an 11-year high. And, gold is widely available. Even big-box retailers like Costco and Walmart have recently started to sell gold bullion, which may be adding to the popularity of gold coins and bars.
Although there may be a learning curve involved in investing in gold, you have several options for getting started. And many of those options are compelling choices for beginners.
Learn more about this unique investment opportunity here now.
How to invest in gold for beginners
Here are four different gold investments to consider when starting out.
Gold IRAs
If you want to diversify your retirement portfolio, you can opt to transfer a portion of your existing individual retirement account (IRA) to a gold IRA.
You may choose a traditional gold IRA so your money grows on a tax-deferred basis over time, or you could opt for a Roth gold IRA which you’ll fund with after-tax dollars. As such, you won’t owe taxes on distributions you take during retirement. Also, If you run a small business or are self-employed, a Simplified Employee Pension (SEP) gold IRA may be a viable option. You could set up SEP gold IRAs for yourself and your employees.
Beginning investors may benefit from working with a reputable gold IRA company to set everything up so that you properly adhere to IRA regulations. The company can help you appoint an IRA-approved custodian and the depository to store the physical gold in your IRA.
Learn more about your gold IRA options today.
Physical gold
Physical gold is available in many forms, including gold bars and gold coins. You may enjoy the look and feel of physical gold, but you’ll also have to store and insure this precious metal, which is important to keep in mind.
The return on investment with gold depends on the asset’s price rising or falling. You can buy physical gold in many ways, including via reputable gold dealers, private collectors and pawn shops. The price you pay will depend on the purity of the gold in the bar or coin, and the price of gold at that time.
As a reference, gold bullion is most commonly sold in one- or 10-ounce bars, with gold currently hovering between $2,300 and $2,400 per ounce. So, it may be easier to invest in gold coins, which are available in quantities of one ounce or less.
Gold futures
Gold futures are another way to invest in gold, although they are highly speculative and can be risky for beginning investors. With gold futures, an investor and seller enter into a contract where the buyer agrees to purchase a certain amount of gold at a specific price and date, regardless of market conditions.
That means if you’re holding the investment and the price is dropping just before the contract’s expiration date, you could lose much (or all of your investment).
If you’re considering investing in gold futures, you must understand how it works and the risks involved. The brokerage firm you work with may require you to sign a form indicating as much before opening up your account.
Gold ETFs
If you’re new to gold investing, you may enjoy the familiarity of stock market investing by owning some stocks in gold mining companies. With this type of investment, your profits can be based more on the company’s performance rather than the price of gold. But in theory, you could still profit if the price of gold rises and the company’s stock increases as inventory becomes more valuable.
Your gold investment could also grow if the company produces more gold or can mine at reduced costs. Conversely, you could lose money if the company mismanages its operations.
Gold exchange-traded funds (ETFs) are a popular way beginners can start investing in gold. With ETFs that exclusively hold gold mining companies, you can get exposure to gold and add diversity to your portfolio. Whether you invest in gold mining companies individually or through an ETF, you can buy these investments through an online broker.
There are multiple gold companies that can help you start investing in the precious metal.
The bottom line
Before you start the process, you should know that investing in gold is not typically a way to grow your money. Over time, the stock market generally outperforms the price of gold. It can, however, be an effective way to protect it against volatility in the large economic climate.
Owning some gold is one way to diversify your portfolio (experts typically recommend limiting it to 5% to 10% of your portfolio). If you want to invest in gold, consider consulting with a financial advisor who can help you determine how to incorporate it into your overall investment strategy. Get started here now.
