Right from ancient civilizations down to modern eras, gold has held down a spot as a great currency through time. The popularity of this asset when it comes to being a hedge over instabilities and inflation has been nothing short of impressive. Only very few assets have been able to rival this popularity.
Now, investors run to this asset to protect themselves from several types of troubles ranging from political issues to economic issues like inflation, currency fluctuations, and so on. For those new to gold investments, the whole business may not be clear yet.
If you are one of such, then you need to know a few things. One of which is, while investing in the physical form of this metal is a good choice, there are other ways to invest in it. Several companies, such as Goldmoney, offer those looking to invest in this asset several smart alternatives.
But, just knowing companies that offer these services won’t do. You also have to be aware of the options available to you so that you can make a choice that will best suit your investment needs. Hence, in this article, we will be discussing several smart ways for you to own gold investment. Let’s get right into it.
1) Gold Mining Firms
If you want to profit from the gold market without being cumbered with its worries (carrying too much of its risks), then you most likely should consider this option. Several companies are involved in mining as well as refining this precious metal. Companies like these usually benefit when the price of this asset appreciates.
As an investor looking to enjoy the benefits of this market while mitigating the risks, you can decide to invest in these companies. Risks are mitigated with this method because big mining companies often operate globally, so other business factors may ultimately affect the success of your investment.
What do we mean? Sometimes, the price of gold may take a dip, during times like these, the company may be profiting due to some other business factors. When this happens, your investment will not take a dip but will equally benefit from the profit. These companies often achieve this by making a hedge against gold prices depreciation. Where this is done, it is usually a standard aspect of the business.
However, not all mining firms do this. Luckily, even when they don’t, they typically provide a safer means of investing than owning the bullion directly. Yet, before this investment is made, the investor will need to do his due diligence to ensure they pick the right company.
The due diligence involves making proper research into the company before you select them, click here to find out more about the meaning and examples of due diligence. Because of how time-consuming this process is, many investors do not find this method to be feasible.
2) Options and Futures
Futures are rightly named since they are contracts made to either purchase or sell an item (gold, in our case) on a set future date. They are not traded in shares but rather in contracts, they also usually represent a preset amount.
Because the amount preset can be quite large, this method is best for seasoned investors. The reason people opt for futures is that their commissions are often low.
The contract may either settle in physical gold or dollars. So, investors need to be sure of the contract’s specifications so they won’t be stuck with the problem of taking delivery of the physical asset on the date for settlement.
Options on the other hand are similar to futures with the major difference being that the option’s owner can purchase the contract at a predetermined price within a given time frame. A major advantage of this method is it leverages the original investment while limiting the paid price loss.
The disadvantage of options is that a premium is charged to gold’s underlying value and has to be paid by the investor for them to get the option.
Options and futures are quite volatile; this makes them an unsuitable choice for several investors. Despite this, futures still happens to be the cheapest method of investing a large amount.
Read Also: All You Need to Know About Gold Investment
3) Mutual Funds and ETFs
Another smart and common way investors invest in this physical metal is through gold mutual funds and ETFs (exchange-traded funds). One share of this type of mutual fund or ETF usually represents a given amount, like one-tenth gold ounce.
Buying these funds is similar to buying stocks into IRAs or brokerage accounts. Hence, it’s more cost-effective and easier than investing in coins or bars directly. Small and new investors can use this because they can buy one ETF share as their minimum investment.
Also, the yearly expense ratios for these ETFs are often quite low at least 0.65 percent. This is lesser than the expense ratio of several other investments.
Several mutual funds often have gold companies and gold bullion in their portfolios. However, only some focus specifically on gold.
Some just-gold funds may invest in mining firms’ indexes, while others may be directly linked to the price of gold, others may be actively managed. Ensure to read the prospectus to find out the method applied by the funds you want to choose.
Some of the major benefits of just-gold mutual funds include:
- Cheaper cost. The required minimum investment is equally low.
- Can be easily owned in either an IRA or brokerage account.
- No need to make individual firm research.
- Allows investors to diversify among several companies. You can visit https://www.forbes.com/ to learn more about diversification.
For average gold investors, the safest and easiest way to invest in this asset is with ETFs and mutual funds.
Gold has been used by investors through time to protect themselves from several economic and even political issues. But, some people shy away from them because of how cumbersome it is to hold physical precious metals. Luckily, there are several other smart ways to invest in this metal without directly owning it. Some of these methods are mutual funds and ETFs, options and futures, and investing in mining firms. All these methods have been talked about in this article.