The most direct way to own gold is to buy physical gold bars or coins, but these can be illiquid and must be stored securely. ETFs and mutual funds that track the price of gold are also popular, and if you have access to derivatives markets in your brokerage account, you can also use futures and gold options. Investors can invest in gold through exchange-traded funds (ETFs), buy shares in gold miners and partner companies, and purchase a physical product. These investors have as many reasons to invest in metal as there are methods to make those investments.
There are many ways to invest in gold. You can buy physical gold in the form of jewelry, bullion, and coins; buy shares in a gold mining company or other gold-related investment; or buy something that derives its value from gold. Each method has its advantages and disadvantages. This can make it overwhelming for beginner investors to know the best way to expose themselves to this precious metal.
Founded in 1976, Bankrate has a long history of helping people make smart financial decisions. We have maintained this reputation for more than four decades by demystifying the financial decision-making process and giving people confidence in the following actions. Gold futures are a good way to speculate on the rise (or fall) in the price of gold, and you could even receive physical delivery of gold, if you want, although physical delivery is not what motivates speculators. The biggest advantage of using futures to invest in gold is the immense amount of leverage you can use.
In other words, you can own many gold futures for a relatively small sum of money. If gold futures move in the direction you think, you can earn a lot of money very quickly. Investing in gold stocks, ETFs, or mutual fund is often the best way to expose yourself to gold in your portfolio. The information presented is not intended to be used as the sole basis for any investment decision, nor should it be construed as advice designed to meet the investment needs of a particular investor.
Nicholas Thompson, who manages Morgan Stanley's physical precious metals offering for Wealth Management customers, says there may be other reasons to consider investing in gold right now. With so many options to choose from, it can be overwhelming to consider how to start investing in gold. And while the stock market has its ups and downs, investing in physical gold can come with many unexpected costs and considerations, including insurance and secure storage. Investment decisions should be based on an assessment of your own personal financial situation, needs, risk tolerance and investment objectives.
Often, the best thing you can do for your portfolio is to stick to your investment plan, not rush to buy gold bars. Despite its ancestral charm, gold isn't always the heavy investment that movies and TV shows may have led you to believe. That said, many investors find this method very rewarding and one of the best ways to invest in gold. Whether you choose to start with gold coins or mining stocks, researching new investment opportunities is the first step to creating a well-balanced financial portfolio.
Investing in foreign exchange involves additional special risks, such as credit, interest rate fluctuations, investment risk in derivatives and domestic and foreign inflation rates, which can be volatile and may be less liquid than other securities and more sensitive to the effects of varying economic conditions. Just keep in mind that financial advisors generally don't recommend investing more than about 10% of your total assets in gold. So, should you go for gold? Although it is usually part of the conversation in times of economic crisis or political uncertainty, gold as part of your portfolio makes sense at any time as a diversifier of your holdings, if not something else. Before buying physical gold or investing in a gold-backed financial instrument, make sure it fits your financial and risk tolerance goals.
Both investors and financial institutions buy physical gold for these purposes and, more recently, exchange-traded funds that buy gold on behalf of investors. These are some of the main benefits of gold, but investment, like all investments, is not without risks and drawbacks. . .