This is a guest post written by Shaun Connell, the webmaster behind dozens of financial websites on topics from financial advice to investing in gold. While I don’t invest a great deal in gold, I think it is a good idea to see other viewpoints and share them with readers. You, of course, must make your own decisions about how you invest, and choose your investment path at your own risk.
As a beginner in the investment world, there can be some things that confusing initially. If gold investments were straight forward, things would be much easier for everyone involved. Unfortunately, it does not always work that way. What type of gold do I buy? Where should I buy it? When is a good time to get involved in the gold market?
These are all fair questions for a beginner to have and you’ll need to have answers to these questions prior to jumping into the gold buying craze. With that being said, this is a complete guide for investing in gold for those who are just starting out and those who are just getting their feet wet.
So why is it a good idea to think about investing in gold? Depending upon who you talk to, you might get many different answers to this question. To put it quite succinctly, gold is a nice product to protect yourself against absolute financial failure.
Many people like the fact that you can hold gold coins in your hands. It’s a tangible asset, whereas things like stocks, bonds, and mutual funds are given to you in the form of a piece of paper. When you hold it in your hand and store it in your safe, you know that your investment is real.
The flip side of that is that when the time comes, you can sell gold assets because of their highly liquid nature. Though the US dollar might fail, the value of gold will be retained because of its place in the global marketplace.
When is the right time to buy?
Before you can make any other important decisions, you need to understand the gold market in terms of timing. Just when should you be jumping in head first into the gold market? The answer to this question really depends upon your own personal opinion of the American economy.
One thing to know about gold at the beginning is that it’s something of an insurance policy against the erosion of the American financial system. When the economy is hurting, the gold price will increase. When there is speculation that the economy will surge, the price of gold will head down.
Though it’s not always this cut and dry, it’s a good place to start when trying to figure out the gold market at large.
Gauging your personal opinions about the economy
So where do you think the economy is headed? If you don’t buy the fact that we’re in for a quick turnaround, then it’s probably a good idea to buy gold now. If you think that the economy’s downfall is mostly overblown and we will be seeing a resurgence in the near future, then you should hold off on buying gold. As with all investments, the idea is to get in at a nice price point. If you can buy gold when it’s at a temporary low point, then you will have a much better chance of making a profit when you finally decide to sell that gold.
What type of gold should I buy?
Once you have spotted a nice entry point into the gold market, the next big question is what to buy.
You aren’t just going to walk up to a bank and tell them that you want to buy $5,000 worth of gold like you would a stock or a mutual fund. Instead, you have to sort through a few different options, with each of them providing some sort of incentive over the other.
The major options are many different types of gold coins, gold bars, gold certificates, and even gold mining stocks. Some people also invest in gold-based mutual funds as a way to limit their exposure to risk.
Expanding upon gold coins
There are many different types of gold coins out there, so depending upon your investment needs, any number of these might be a good call. Some of the most popular coins today include the following:
* Chinese Panda Coins
* American Eagle Coins
* Canadian Maple Leaf Coins
* South African Krugerrands
These coins are solid choices, because they are in high demand and they have high growth potential. The idea behind investing in gold coins is that you will have the ability to sell them internationally, even if the American system falters more than it is now. In addition, there are many different avenues available for selling gold coins, so when you spot a nice price to make a solid profit, you can sell them quickly and without a whole lot of red tape.
Where to buy gold coins
Those looking to buy gold coins can do so either online or out in the real world through a number of different providers. Individuals looking to buy online can do so either through the popular auction sites like eBay or through some of the more reliable gold sites. The important thing for new investors is to remember that there are some dangers to investing online, so you will need to research any site that you come across prior to making your big choice.
Offline, individuals can buy gold coins through small coin dealers and shops, or they could choose to go with banks. These days, banks charge a heavy fee on top of the price of gold, so it makes this a difficult option for folks who want to keep their investment reasonable. It can be smarter to buy them from dealers, as the prices are significantly lower.
Buying gold bars
Gold bars have a similar appeal as gold coins, since they are a physical asset that can be stored in the sanctity of your own home. The difference is that bars are somewhat more difficult to store and they are harder to sell when the time comes. Many individuals will purchase pure gold bullion bars, since their value is thought to stay high for the long run. Bars are harder to find and one bar will be much more expensive than a coin. Still, they retain their value along with the price of gold, so they are a similar investment type in that sense.
Gold mining stocks and funds
When investing in gold stocks, you are not getting the same sort of physical insurance that you would get with coins or bars. Still, there’s an opportunity for more growth with stocks and funds. Most people choose to invest in gold because it has the potential for slow, steady growth over time, but that’s not really the approach that gold stock investors take.
For the most part, these people will invest in two different types of gold stocks. They might invest in blue chip gold stocks, which would include the large companies that have the market share and dominate the industry. These are stocks that seem to do well over time and consistently produce results.
Others choose to go with smaller, exploratory stocks, since these have the ability to explode in value. These stocks are those of small companies that need backing to go out and look for new gold mines. In some cases, these companies will do well and then be bought out by a larger company, bringing huge stock returns for investors.