Investing in gold is a great way of diversifying your investment portfolio. When it comes to gold investing, the first thing is to make a decision that you have to do it. The other is to choose from your options.
There are plenty of ways to invest in gold but here are four of the most popular options.
The most popular and common way of investing in gold is to buy bullion or gold coins. Physical investment grants you a lot of exposure to the physical asset; the most you can get as an investor. This is probably the biggest advantage of investing in the metal physically. However, physical investment does have a set back, which primarily is the cost of storing and insuring the metal. Moreover, there is also a transaction fee that is associated with buying the metal and selling it. These “unknown” or “hidden” costs sum up to a lot particularly if the quantity of the metal is high.
Gold Mining Stocks
Another way of investing in gold is through investing in mining stocks. Mining stocks are a way of leveraging higher gold prices via corporate operations. The cost of mining gold varies from country to country and company to company but it is lower than the cost of the existing trading prices of the metal. However, gold mining stocks have their disadvantages too. Purchasing shares of a gold mining company instead of investing in the metal in physical form, increases the investor’s risk to many new dimensions such as the risk of operation, risk of management issues, risk of an acquisition going wrong and so on.
Crystal Ball Bets
A relatively less known but popular gold investment choice is through crystal ball bets. Crystal ball bets come without any counterparty risk and therefore are quite feasible for those who don’t want to take on a lot of risk. Moreover, these also have higher liquidity. However, the disadvantage of crystal ball bets is the cost. Cost and leverage go hand in hand and can become a huge concern.
Exchange Traded Treasure
Exchange traded treasure such as the GLD and its other less expensive counterparts allow investors to get exposed to the metal without taking on too much risk. Therefore, they make a good choice for all less experienced investors as compared to other gold investing options such as physical gold or investing in the gold future market.