How to invest in gold for beginners? What are good ways to invest in gold? You will find the answer in this post.
Is it safe for beginners to invest in gold
If you don’t manage money, money will ignore you. To have a better life, investing money is something you need to master. Usually, faced with such a risky investment way as stocks, many people would recommend gold to beginners, the advantages of gold is visible to the naked eye, many people think it is very safe. So is gold really safe for beginners?
Precious metals are considered a safe haven asset, and their highest demand occurs during turbulent times, such as the current COVID-19 pandemic. At its last peak in August 2020, gold topped $2,000 for the first time. That’s up from $1,485 in the same period in 2019.
Throughout history, few investments compare favourably with gold, which has been a stable investment throughout history. It can hedge against almost any kind of trouble, from inflation to economic turmoil or currency fluctuations to war.
Gold has been revered since the dawn of civilization and is still seen as a haven in troubled times. Gold makes sense as part of a properly diversified portfolio, and there are several ways to own it. Therefore, for beginners, gold is a relatively stable investment
How to invest in gold for beginners
Before you start buying gold, it is important to think about what you hope to achieve with your investments so that you can choose the right type of gold for your investment strategy. Here’s detailed introduction of these gold investment methods for beginners.
Purchasing gold jewelry is an not the direct way to invest in gold for beginners. However, jewelry is often worth more to the wearer than the investment because precious metals are made into jewelry and then sold on the retail market. Expensive gold jewelry may retain its value, though this is usually more because of its collectible value than its gold content. Another drawback of jewelry as a gold investment is the cost of storage and insurance. Nor is it a liquid investment because you can’t easily sell it for market value. For beginners, this is the most intuitive way to invest in gold.
Gold bars are pure gold (99.5% to 99.9%) and are made into bars or ingots, usually in rectangular shapes for easy storage. Central banks often keep gold bars in their vaults as reserve assets. Gold bars give investors direct access to the price of gold. However, it is expensive. With gold trading at around $2,000 an ounce in early 2022, a single bar would be expensive; An ingot can also cost a lot, depending on its size. In addition to the cost of buying bullion or bullion, investors have to pay for storage and insurance for their gold investments. Nor is gold bullion a very liquid investment.
Gold coins have a long history as money. While they are no longer legal tender, gold coins are still valuable to investors as a store of value. There are costs associated with buying, storing, and insuring gold, which can affect performance. At the same time, they are not very liquid because you need to find collectors or other buyers willing to buy coins from you.
Gold shares include companies focused on gold exploration and mining, which also include gold streaming companies and royalty companies. However, this investment method may be difficult for beginners to grasp. It is recommended to wait until you play with other investment methods before trying it out.
A gold certificate is a note issued by a company certifying possession of a specified amount of gold. Once issued as a monetary equivalent by the U.S. government, some banks and investment firms still issue gold certificates that give the holder partial ownership of gold. Gold certificates give investors direct access to the price of gold. However, they are only as secure as the underlying company that issued the certificate. If the company goes bankrupt, the gold certificate becomes worthless.
Gold futures and options
Futures contracts give holders the right to buy a specified amount of gold at a future date and price. Option contracts also enable holders to buy and sell shares in gold ETFs or gold mining stocks at a specific price and date. Contracts move with the underlying price of gold or the price of gold-related stocks, giving investors access to gold without owning the underlying investment.
Reasons for beginners to invest in gold
“Gold has a strong track record of returns, liquidity and low correlation, making it a very effective diversification tool,” said Juan Carlos Artigas, executive director of research at the WGC.
These qualities of gold are especially important for beginners:
- Returns: Gold has outperformed stocks and bonds in some ways, though not always.
- Liquidity: If you buy certain types of gold assets, you can easily convert them into cash.
- Low correlation: Gold generally behaves differently from stocks and bonds, meaning that when they rise, gold can fall, and vice versa.
- Diversification: Because gold is generally not highly correlated with other assets, it can help diversify a portfolio, meaning the overall portfolio is less volatile.
- Defensive stores of value: When investors sense threats to the economy, they typically pull out of gold, making it a defensive investment.
These are ways for beginners to invest in gold, opportunity is for those who are prepared, the first step in building a balanced financial portfolio is to research new investment opportunities, whether you decide to start with gold coins or mining stocks.