Five Golden Choices for Investors
How to get started with this hot investment commodity.
Posted May 9, 2012
In the dark about how to invest in gold? Despite gold’s increasing value and popularity, many folks don’t know where to get started.
If that includes you, you’re not alone. A recent survey shows that nearly half of US investors don’t believe they’re knowledgeable enough about the precious metal to make a decision about adding gold to their portfolios. The World Gold Council highlights these five options to get you started:
1. Gold Exchange-Traded Funds (ETFs)
Since 2004, U.S. investors have been able to buy Exchange Traded Funds (ETFs) backed by physical gold through their brokerage accounts on a regulated stock exchange, just like a share of a company’s stock. Ownership of gold ETF shares provides investors with a vehicle that reflects the performance of the price of gold bullion, less expenses of the ETF. With these gold ETFs, individuals do not need to physically store gold, so no need for a safe or safety deposit box. Different types of gold ETFs are available on the market but not all are 100 percent backed by physical gold, so read the prospectus carefully and ask your financial adviser to help you select the one that best suits your needs.
2. Gold mining stocks
With this option, you are investing in a gold-mining company, rather than gold bullion. Depending on the company, you may be able to generate income from dividends. While the value of gold stocks has historically been closely tied to the price of gold itself, other factors can determine the value of the individual companies. More than 300 gold-mining companies are listed and publicly traded in the U.S.
3. Gold Accumulation Plans (GAPs)
Similar to a conventional accumulation plan, GAPs allow investors to set aside a fixed amount of money every month in order to purchase gold on various days. This cost averaging cushions investors from short-term variations in the price of gold. When the account closes, investors could have one or more of the following alternatives: receiving bullion bars or jewelry or simply selling the gold for cash.
4. Gold bars
Gold bars range in size from just a few grams to the 400 ounce London Good Delivery bars most people have only seen in the movies. There are many different refineries that produce gold bars and most companies that sell gold will offer a variety of sizes to suit various budgets.
5. Gold coins
Issued by governments around the world, gold bullion coins are a popular choice for investors. Their value is primarily based on their fine gold content. Bullion coins differ from numismatic or collectable coins, which are valued on rarity, design and finish rather than their gold content. Many mints will offer “proof” versions of the bullion coins at a premium to the gold content for collectors and those looking for an heirloom gift for milestone celebrations such as a birthday or wedding. American Eagle coins are a common form of bullion coin in the U.S. and other popular bullion coins that are widely available include the Gold American Buffalo, Canadian Maple Leaf, South African Kruggerrand and Chinese Panda and Austrian Philharmonic.
Where to buy: Both bullion coins and gold bars may be purchased online or by phone from companies that specialize in precious metals.
“There are a number of ways to invest in gold and each can play its own role in your portfolio. Owning an ETF, bars or coins and mining shares may be viewed as complementary investments,” says Juan Carlos Artigas, Global Head of Investment Research at the World Gold Council.
The World Gold Council (www.Gold.org) provides useful information on why, how and where to invest in gold.