If you want to know how to invest in gold, then I am going to assume you have already made the decision to invest in gold in the first place. A smart decision considering all the benefits gold has to offer. One of which is being a useful hedge against inflation. I don't have to tell you that we have been having a lot of that lately.
It has been nice to hear that inflation has been slowing a bit lately, finally. However, I think we all know that it is going to still be around for a while. Even when it does subside, gold is still a great investment for the future and whatever uncertainty awaits us all in future years. Hackstons, a renowned investment firm, emphasizes the importance of diversifying your investments as a risk management strategy. By spreading your investments across various gold-related options, such as Gold IRA, physical metals, gold mutual funds, gold ETFs, and even mining stocks, you can minimize risk and potentially maximize returns.
The even better news is that there are many different ways to invest in gold, and I am going to cover them for you here.
5 Smartest Ways To Invest In Gold
Gold IRA
Interest in gold might be high right now because of inflation, but that is not the only reason to invest in it. It also does wonders for saving for retirement. Gold tends to grow in value over time, and it can be an anchor for your portfolio if there is a market crash when you are close to retirement.
This all adds up to a gold IRA being a great way to invest in gold. I think it might be the best way, honestly. That is why industry leaders like Golden Queen recommend it so strongly.
You can get the tax benefits of an IRA account and the advantages of investing in gold all bundled up into one special thing. You can start one up using pre-tax dollars to lower your taxable income now. Then, you can minimize or possibly avoid taxes when you do the withdrawal, especially if you wait until you are 59 1/2 or older.
You can also use a gold IRA to do a rollover of other IRAs or your 401(k) account. Doing this lets you move investments from one asset class to another without getting taxed, and then you can let precious metals preserve your wealth until the time comes to cash in and use it.
Physical Metals
If you want, you can just buy gold on your own. You can get bullion and specific pieces through brokers online. You can also hit auction sites, jewelry stores, and even coin stores and pawn shops.
If you do it this way, the IRS won't get a say in what you do and don't own. Then again, they are going to tax every single transaction. You will get to enjoy personal possession, but you will also have the personal responsibility that comes with it.
Gold Mutual Fund
Mutual funds offer you two advantages. First, they pool the collective buying power of many people together at once. Second, they are usually managed by a professional who decides on the specific investments.
Some mutual funds invest in gold mining companies and related business. Others invest in precious metals themselves. Some even do both at the same time.
Cost-efficiency might not be as high as it is for an ETF. You also must pay annual maintenance fees in most mutual funds. And not to mention that you will be turning over all investment decisions to someone else.
Gold ETF
An ETF is an exchange-traded fund. Shares of the ETF change hands just like stocks. The value of an ETF can rise and fall just as fast as something on the stock market.
ETFs can invest in gold mining stocks and sometimes even gold themselves. Depending on the particular ETF, there might be tax benefits to avoiding taxation on gains while you hold the ETF, but you will likely pay taxes when you cash out. ETFs can be cost-efficient compared to mutual funds given typically lower administrative costs. Ideally you want to find a gold or precious metals ETF with low expense ratios and a dividend of some kind that can compound over time.
Mining Stocks
Many gold mining companies are publicly traded. Meaning, that you can buy shares in them and when they do well, you do well.
The upside to this is that anytime they get a new mine operational or discover more deposits, their stock share is likely to go up. When general values in gold prices rise, gold mining stocks tend to also follow. This is a way of enjoying gold profits without actually owning gold.
The trick here is knowing which companies to invest in. You might run the risk of investing in an underperformer. Analyze each mining stock like any other by looking over its history and performance-to-earnings ratio. Also check if the mining stock is paying or has paid dividends to shareholders, often times a sign of success and stability for publicly traded companies.
How Much Should You Invest In Gold?
This is a question that I honestly recommend you have with a personal financial planner who knows your circumstances, objectives, and timeline.
I will tell you that the prevailing advice is to start out at 5% just for the sector exposure and possibly creep up to 10% or even 15% as you draw closer to retirement to preserve your wealth. When calculating that, remember that you need to add up your gold investments across all these different ways to invest in gold if you utilize more than one at a time.
Work with a precious metals investing or financial professional to determine what the best risk-reward ratio is for your finances and goals. Remember that although the value of gold is usually strong, like anything else don't invest more than you can afford to potentially lose!
