If you would like to add gold and other precious metals to your portfolio, you are definitely not alone. When the stock market gets rocky and the future becomes unpredictable, investors often look to precious metals for safety and stability. Whether you want to diversify your holdings, create a buffer for volatile stocks and mutual funds or just experiment with a new asset class, buying gold can be a smart move. But before you call your broker or set up a safe for your gold, you need to understand your options. Here are some key things you need to know about buying gold for your portfolio.
Physical Gold Options
There are a number of ways to add physical gold to your portfolio, and some investors prefer the tangibility of these types of assets. If you invest in physical gold, you can hold the metal in your hands and revel in its value. These are your main options if you want to hold gold in its physical form.
• Metal value coins – Investors can purchase coins with a value based on the actual weight of the precious metal. These coins can be a smart way to invest in gold, and it is relatively easy to determine their value based on the spot price of the precious metal.
• Collectible coins – If you are looking for an asset that could rise (or fall) in value based on criteria besides the spot price of gold, collectible coins are a good option. The value of these collectible coins can rise and fall on a daily basis, giving investors an additional way to profit from their holdings.
• Gold bars – There is no more direct way to invest in precious metals than buying the actual gold bars. Like metal value coins, gold bars are valued based on the weight of the metal and its purity, and that makes it easy to buy and sell.
Buying physical gold can be a smart way to add precious metals to your portfolio, but there are some complicating factors to consider. If you plan to keep your purchases at home, you will need a safe or other secure place to stash your holdings. If you would rather keep your gold somewhere else, you will likely incur storage costs, and that could erode the profits from your investment even if the price of gold ultimately rises.
If you want to invest in gold but do not relish the thought of buying a safe or incurring storage costs, there are other ways to invest. Here are some of the most popular ways to invest in precious metals without owning physical gold.
• Precious metal mutual funds – If you want to spread your risk around and profit from the rise in gold, precious metal mutual funds could be the answer. These sectors funds invest in stocks that tend to rise with the price of precious metals, and they can be excellent options for first time investors.
• Natural resources funds – Natural resource-based mutual funds do not invest solely in precious metals like gold, but they often rise when gold prices spike. In addition to gold and silver, natural resource-based mutual funds may own things like oil drillers, mining companies and solar farms.
• Gold ETFs – Buying an exchange traded fund (ETF) that tracks the price of gold is the most direct way to invest in the precious metal without actually owning gold bars or weight-based coins. These exchange traded funds can also be less expensive to own than physical gold or sector-based mutual funds.
• Gold mining stocks – When the price of gold rises, the companies that mine it stand to benefit. Buying gold mining stocks in anticipation of a rise in gold prices could be very lucrative, especially if you use a discount brokerage firm with low trading costs.
Investing in precious metals can be a smart move, but it is important to know your options. The more you know about how precious metals like gold and silver work and how to buy them, the easier it will be to make a wise investing decision.