Who still thinks about gold? Apparently, some long-term investors do.
In the age of digitalization, gold remains a lucrative, stable investment. It has existed for a long time and provides many advantages to those who choose it to build assets.
Why? First, it’s a non-perishable asset, which means its quality doesn’t change regardless of market trends. Second, gold intrinsically keeps its value over time, only gaining more in worth as decades and centuries pass. Third, thanks to the previously mentioned perks, it’s practically safe from dramatic changes in interest rates and inflation. That’s in stark contrast to regular currency.
If you’re a retail investor considering putting money into precious metals, you have more to gain because of the security gold provides. But how does that work?
This guide serves as a refresher for seasoned investors and a primer for new ones. Here’s what you need to know about investing in gold.
How To Buy Gold In Installments
Have you asked yourself, ‘can you buy gold in installment?’
If you have, the answer is yes. Adding to your gold reserves if you don’t have total cash at the moment is always an option. You can spread a financial burden over a long period by purchasing a little gold monthly or weekly. This eliminates some of the pressure of keeping up with payments.
Buying in installments also has the following perks:
- Dollar-cost averaging: As an investor, you’d like to invest when the prices are low. However, it’s not easy to know when that happens. That’s why a dollar-cost averaging strategy is the way to go; it allows you to invest a specific dollar figure in-store at standard periods. In turn, this guarantees a boost in your rate of return.
- Less guesswork: If it’s your first time, you may wonder how to create an extensive, diversified portfolio independently. Purchasing monthly installments makes this easier since you won’t have to stress over offsetting your portfolio, giving you peace of mind. There’s no need to commit vast sums of money before knowing how gold investments work.
In contrast, buying in bulk may be costly, tedious, and risky. It’s better to start your investment on a smooth path to make sure you get the best returns.
Methods Of Investing in Gold
People who invest in gold have the following options:
- Gold jewelry: One option for investing in gold is buying gold jewelry. You can sell it in-store, especially if you’re a retail jeweler. It’s easy, but it has its caveats. You may have to spend a lot of money to insure your gold and find ways of keeping it safe since it’s susceptible to theft.
- Gold bullion: This takes the form of rectangular bars that provide great ease of storage. Because of their high cost, you may want to place them in a bank, which typically keeps bullion as a reserve asset in vaults. This investment option isn’t very liquid, as it may be challenging to find a ready buyer.
- Gold stocks: Several firms concentrate on searching for and excavating gold. It’s considerably liquid because you, as a retail investor, can purchase and sell the gold stocks in a brokerage account. Gold stocks, however, aren’t without their shortcomings. When gold miners aren’t getting enough, prices can start climbing. The mishandling of operations can also cause costs to increase, making the gold’s value drop quickly.
- Gold coins: You can keep these at home, letting you have physical gold in your possession. Pure gold coins include Canadian Maple Leaf, Britannia, and American Buffalo, while alloyed gold coins include the South African Krugerrand and American Gold Eagle.
- Gold Exchange-Traded Funds (EFTs) and mutual funds: When the EFTs you choose mainly handle physical gold bars, they can provide you as a retail investor with a quicker way of knowing the cost of gold. They’re the simplest way to invest in this metal and are significantly liquid.
All these investment options have pros and cons. So, you have to weigh each one to see which offers you more advantages as a retail investor.
Key Price Drivers Of Gold
Gold prices are usually affected by supply and demand. When the need is high, the supply becomes less. This means you’ll have to buy your gold at a higher price. Similarly, costs decrease when the need is low.
Other price drivers include:
- Inflation
- Interest rates
- Geopolitics
- Global economic performance
Aside from these factors, time plays a big role in determining gold value. Be smart whenever you check current rates and know when to go all in.
Physical Gold Differs From Gold Stocks
When you invest in gold stocks, it doesn’t mean you’re getting physical gold. Gold stock acquisition happens when you buy shares from well-renowned gold mining companies. It’s a good option if you don’t want to own physical gold but are interested in getting relatively similar value. Physical gold is when you have bars, coins, bullion, or jewelry in your possession and can store them.
So, Are You Going Gold?
Every gold investment option has its advantages and disadvantages. But it’s a matter of taking your time to assess each one before settling. It’s good to start with the ones with minimal risk to you. Liquidity should also be a top consideration. Either way, you should be able to turn your gold investment into cash as quickly as possible with these facts. Talk to experts to learn more.
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