5 Top Tips for Investing in Gold

Investing in gold is far harder than just walking into a store and buying gold by paying with your credit card. It may be possible to do that somewhere, but it is definitely not advisable. When you invest in gold, you are investing in one of the safest investments, one that has never been seen to fall in prices over the long term. However, even then you could come out a loser from your gold investment if you do not follow the following 5 top tips for investing in gold.

 

  1. Gold is a Long Term Investment

Gold has long been considered a store of value. As a trusted store of value, its actual value will not fluctuate way above or below the mean. Further, the long term trend in gold prices, since time immemorial, has been to stay consistently high. The reason behind it is not difficult to find: there is a limited amount of gold in the world, so all the money is chasing a limited resource, which increases its value over time. In the short term, gold can go down or up. In terms of gold, any period less than 5-10 years is short term.

 

  1. Physical gold can prove a hassle

The traditional way to invest in gold is to buy gold in the form of gold bullion, where bullion refers to gold coins or gold bars. Jewelry is another way to invest in gold. These are all physical gold investments, in which you actually own gold. There are some advantages to this form of investment, such as the fact that you can actually own the gold you buy, but overall there are more disadvantages than advantages. For one, you have to worry about the security of your gold coins or bullion; if you don’t take good care, your gold might be stolen or lost. Then there is the fact that it is harder to sell gold bullion or jewelry at real market rates. These two reasons make real gold quite an inconvenient investment.

 

  1. Invest in gold ETFs and Gold mining Companies

ETF stands for Exchange Traded Fund, and in the case of gold, refers to a fund which is backed by real gold bullion stored away vaults. However, rather than trade the bullion, traders and investors trade ownership rights to the gold in the form of shares in ETFs. This makes it easier to buy and sell ETFs.

 

Gold mining companies are another way to invest in gold. Their share prices are strongly correlated with the price of gold, due to obvious reasons, so if you think that gold prices are going to go up, you can conclude that shares of gold mining companies will go up too. Again, it is more convenient to trade in gold mining shares than in real gold. However, it should be kept in mind that gold mining share prices are not always positively correlated with gold prices.

 

  1. In times of Crisis, go for Gold

Gold is said to have real value, unlike currencies which are valued because they are backed by central banks of different countries. With so many countries at risk of default during the recent economic turmoil, the risk associated with currencies has again been highlighted. This is the primary reason why gold prices have been going up over the last few years. So if you want to prepare yourself for any crisis, you should invest in gold. Experts say that 10% to 30% of your net portfolio should be invested in gold.

 

  1. Do not fall for Pop Marketing

With the economic turbulence attracting more investors in gold, a number of companies have started to promote gold as a safe-haven investment. These companies are most often seen in US media during prime time news, where all the world’s worst crises are unfolding. This is a type of scare-marketing whose main purpose is to drive investors to buy a company’s product, and not to make better investments. You should learn more about gold investment from the real experts, who will not be seen on any TV or internet advertisement.