Gold as an Investment: A Beginner’s Guide to Safe Investing
Since the time it was discovered as a ‘shiny yellow nugget’ in riverbeds, civilizations have been under the magic spell created by gold. Since then, the brilliance, natural beauty, and lustre of yellow metal have attracted humankind. It has become a part of the human culture. Its unique properties like malleability, ductility, and resistance to tarnishing make it enjoyable to work and play with.
Evolution of gold
In earlier times, gold was used to make coins, precious artifacts, statues of gods, crowns of kings, and even a part of their attire. From that age to today, gold has come a long way. Today, gold holds a prominent place in the economy of every country.
Gold as an investment for beginners
For ages, people have been investing in gold. Apart from giving a mental satisfaction of ‘owning’ wealth, the yellow metal also acts as a hedge against inflation. People, regardless of their age and income, invest in gold.
However, if you are a beginner, it makes sense for you to stop for a while and ask a few questions. It would be best if you cleared out your short-term and long-term objectives. Only when you get satisfactory answers to these questions should you proceed with the gold as an investment.
For the help of beginners, some of the common questions are their answers are given below:
1. Is investing in gold a good idea?
This is one question to which you might get as many answers as many people you speak with. To cut a long story short, gold is a good investment option to protect you against financial troubles. While holding stocks, bonds, or mutual funds may be easy to store; there is nothing that can beat gold when it comes to ease of liquidity. Not just that, the value of a US dollar may go down, but gold will always retain its value due to its position in the global market.
2. What is the right time to Investment in Gold?
This is a good question. Before investing in gold, one needs to understand how gold prices behave in the market. And what is the right time to put your hard-earned money into gold? In simple terms, one can say it’s like an insurance policy to hedge against the ups and downs of the economy. Though not a rule, generally, it has been seen that when the economy is going down, the price of gold goes up. And when there is speculation about the economy rising, the price of gold falls.
Spend some time studying the economy. When you expect the economy to boom shortly, then wait before buying gold. And if you feel that the economy is at a low point, that’s the right time to jump in. If you buy gold at a temporary low end, then you stand an excellent chance of making a profit when you decide to sell the gold.
3. What type of gold as an investment?
Once you get clarity on when to enter the market, the next important decision is to buy? Buying gold is not as simple as buying stocks. You need to understand the various forms of purchasing gold and understand the pros and cons of the same.
There are various forms of buying gold- in coins, biscuits, bards, certificates, and even gold mining stocks. Some people who want to limit the risk factor also invest in gold-based mutual funds.
Within gold coins, there are different types of gold coins. Some of the trending gold coins currently trending are – Chinese Panda Coins, American Eagle Coins, Canadian Maple Leaf Coins, and South African Krugerrands
Buying and selling gold coins is easy since the amount involved is not too much. So, whenever you need money or sense a good opportunity, you can sell the gold coins without hassles.
On the other hand, buying gold bars, though they have the same charm, involves a higher investment. Also, they require more space to store. So, it isn’t easy to store them and sell them if and when there is a need. Still, many people prefer to buy pure gold bullion bars as their value stays high for the long run.
4. Where should I buy from?
When planning to buy gold coins or bars, there are several options. You may purchase them online or offline. There are several apps and websites (including auction websites like eBay) selling gold when it comes online. However, there are some risks attached to investing in gold online. Hence, the app or website must be reliable. You should research a site thoroughly before investing.
If you are still unsure about buying gold online, you may go for the physical market. There are several banks, jewelers, and shopkeepers who deal in buying and selling gold.
But most banks charge a high processing fee over and above the price of the gold. This makes this expensive for small investors. In such cases, it makes sense to go with small dealers and jewelers, as their charges are significantly lower.
5. Should I invest in gold in non-physical form?
Buying gold in physical form gives you physical insurance; however, there are challenges in storing physical gold. Investing in gold stocks does not offer that kind of mental satisfaction, but it’s much safer in storage.
Investing in gold stocks and funds has an opportunity for more growth. There are two kinds of people. Some people don’t want to take too much risk. Such people prefer to invest in blue-chip gold stocks managed by large companies that dominate the industry. These stocks offer consistent returns over a period of time—people who want abnormal profits and are ready to take risks to invest in smaller, exploratory stocks.
These are primarily start-ups that need support but have the potential to explode in value. In case you are lucky, the company does well and is bought out by a larger company. This increases the market value of the company and brings more than handsome returns for investors.
Investing in gold is a good idea. However, like any other gold as an investment, one should also invest in gold after taking your short-and long-term financial goals. Suppose you are ready to have a longer investment horizon and have some risk tolerance. In that case, gold is a good investment idea. If planning to buy gold online, one must research the website thoroughly to ensure it is reliable. When buying gold from the physical market, one needs to be sure that the gold you are buying is pure and genuine.