If you object to owning physical gold, buying shares in a gold mining company may be a safer alternative. If you think gold could be a safe bet against it. If you think gold could be a safe bet against inflation, investing in coins, bars or jewelry are paths you can take to gold-based prosperity. Lastly, if your primary interest is to use leverage to profit from rising gold prices, the futures market could be your answer, but keep in mind that there is a considerable amount of risk associated with any leverage-based holding.
Savers and investors like gold for many reasons, and it has attributes that make the commodity a good counterpoint to traditional securities, such as stocks and bonds. They perceive gold as a store of value, even though it is an asset that does not produce cash flow. Some see gold as a hedge against inflation, as they worry that the Fed's actions to stimulate the economy — such as interest rates close to zero — and public spending could cause inflation to rise rapidly. Your portfolio should be structured in a way that helps you achieve your long-term goals.
However, many experts warn that you should be careful about how much gold you should include in your portfolio. A general rule of thumb is to limit gold to no more than 5% to 10% of your portfolio. Depending on your situation and your risk tolerance, you may be more comfortable with a larger or smaller share of gold in your portfolio. That said, there is no denying the strong performance of gold as an investment in the past 20 years.
Despite its ancestral charm, gold isn't always the heavy investment that movies and TV shows may have led you to believe. For most investors, buying shares in a streaming company and royalties is probably the best option to invest in gold. The biggest advantage of using futures to invest in gold is the immense amount of leverage you can use. Of all the forms of investing in gold, the riskiest is trading futures or options contracts, a form of speculative investment.
Just keep in mind that financial advisors generally don't recommend investing more than about 10% of your total assets in gold. These investors have as many reasons to invest in metal as there are methods to make those investments. They provide exposure to gold, offer growth potential through investment in new mines, and their wide margins throughout the cycle provide some downside protection when gold prices fall. Investing in physical gold can be a challenge for investors more accustomed to trading stocks and bonds online.
If you're concerned about inflation and other calamities, gold can offer you a safe haven to invest. Investing in gold isn't for everyone, and some investors just bet on cash-flowing businesses instead of relying on someone else to pay more for the shiny metal. More and more investors are concerned about the social and environmental impact of their investments, and gold mining can leave a significant toll on the environment and raise human rights and governance concerns, as gold mines are located in conflict-affected or high-risk areas. If you are looking for diversified investment in precious and semi-precious metals, a miner that produces more than just gold could be considered a net positive.
Before buying physical gold or investing in a gold-backed financial instrument, make sure it fits your financial and risk tolerance goals. Since this means buying shares of gold mining companies, you can invest using your brokerage account.