Mutual funds and ETFs are generally the easiest and safest ways to invest in gold, with an IRA backed by gold being the most secure option. Each share of these securities represents a fixed amount of gold, and you can easily buy or sell these funds in your brokerage or retirement account. Of all the ways to invest in gold, the riskiest is the trading of futures or options contracts, a form of speculative investment. Futures and options are derivatives, meaning that their value is based entirely on the price of an underlying asset. Founded in 1976, Bankrate has a long history of helping people make smart financial decisions.
We've maintained this reputation for more than four decades by demystifying the financial decision-making process and giving people confidence in the steps they need to take next. Gold futures are a good way to speculate on the rise (or fall) in the price of gold, and you could even accept the physical delivery of gold if you wish, although physical delivery is not what motivates speculators. The biggest advantage of using futures to invest in gold is the immense amount of leverage you can use. In other words, you can hold a lot of gold futures for a relatively small amount of money.
If gold futures move in the direction you think, you can make a lot of money very quickly. There are many ways to invest in gold. You can buy physical gold in the form of jewelry, ingots and coins; buy shares in a gold mining company or other gold-related investment; or buy something whose value derives from gold. Each method has its advantages and disadvantages.
That can make it overwhelming for beginning investors to know how best to expose themselves to this precious metal. Bank accounts, high-interest savings accounts and term deposits are considered safe investment options. Fixed-interest investments, including government bonds, corporate bonds, bonds and equity notes, can also be considered safe investments. For centuries, people have used gold as a kind of currency because they believe it will always be valuable in the future.
Investing in gold can provide protection against systemic risk and involves no credit risk, making it one of the safest investments. Owning physical gold means that you are the direct owner of gold ingots and that the property is protected by property rights laws. These types of investments are considered safe, especially compared to some riskier investment options, such as stocks or ETFs. This makes gold ETFs and mutual funds the safest option for most investors looking to add some of the stability and brilliance of gold to their portfolios.
Because gold is volatile in the short term and may lag behind stocks in terms of long-term price appreciation, financial advisors usually recommend investing no more than 10% of your savings in gold. Gold mutual funds, which pool the money of several investors and manage it on their behalf, usually invest in the shares of mining or gold refining companies, although some also have small amounts of ingots. In addition to the cost of buying a gold ingot or ingot, the investor would also have to pay for the storage and insurance of their gold investment. Alternatives to investing in gold include buying shares in gold mining companies or gold exchange-traded funds (ETFs).
If you're concerned about inflation and other calamities, gold can offer you a safe haven for investing. When economic times get tough or international conflicts, such as the war between Russia and Ukraine, destabilize markets, investors often turn to gold as a safe haven. And in fact, during financial calamities, when investors flee the stock market, gold prices tend to rise. Investing in the shares of companies that extract, refine and trade gold is a much simpler proposition than buying physical gold.
Gold mutual funds, such as the Franklin Templeton Gold and Precious Metals Fund, are actively managed by professional investors. In addition, since gold does not produce cash flow, in order to make a profit with gold, investors must rely on someone else to pay more for the metal than they do. Investors like gold for many reasons, and it has attributes that make this commodity a good counterpoint to traditional securities, such as stocks and bonds. Throughout history, few investments have rivaled gold in popularity as a hedge against almost any type of problem, from inflation to economic turmoil or exchange rate fluctuations and war.
We'll explore all the ways you can invest in gold and discuss their advantages and disadvantages so that you can learn more about investing in gold. . .