Today’s markets are full of uncertainties and risks, which is why many investors are turning to precious metals as a safer alternative. Gold is a great hedge against inflation, fiscal fluctuations, and political instability. But how do you know when you’ve reached the level of risk that you can tolerate?
In other words, how do you know when it’s time to invest in gold? This article will take a look at the factors that you should consider before investing in gold and a few ways to calculate how much gold you should buy.
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With that being said, let´s continue with the article!
How to Figure Out How Much Gold to Invest
If you’re interested in investing in gold, you need to figure out how much of it you want to buy. How much you should invest will depend on several factors, such as your financial situation and the expected return on your gold.
One way to figure out how much gold you should buy is to use a spreadsheet. You can use this spreadsheet to track your investment over time, ensuring that you don’t overshoot your goal and end up undercapitalized. If you aren’t comfortable tracking your investments yourself, you can also use a gold investment management service.
Another way to figure out how much gold to buy is to examine your situation. For example, if the government is expected to increase taxes or reduce expenses in the coming years, you may be able to justify buying more gold than usual. Similarly, if the economy is expected to grow rapidly in the near future, you may want to buy less.
If you decide that you’re ready to invest in gold, you can calculate how much you need to cover your expenses for a year. To do this, you’ll need an estimate of your annual expenses, such as your monthly rent, monthly car payment, insurance, etc. Once you have this figure, you can divide it by 12 to determine how much gold you’ll need to cover your expenses.
How to Calculate How Much Gold to Buy
Before you start buying gold, you first need to calculate how much you should buy. This is usually done using a target allocation formula. With a target allocation formula, you first determine how much you want to invest in gold and then work backward to determine how much you should buy.
Let’s look at an example to illustrate what I mean. If you want to invest 10% of your assets, you’ll need to buy 200 oz of gold. To figure out how much you should buy, you first need to determine how many oz you should buy based on your investment percentage. Let’s say you want to invest 10%. To figure out how much you should buy, divide 10% by 100 and then multiply the result by the total value of your assets (including cash, stocks, bonds, and real estate).
In this case, 10% divided by 100 and multiplied by the total value of your assets gives you 0.1 x $250,000 = $2,500. That means your investment allocation should be $2,500 worth of gold.
Next, you need to work backward from your target allocation to figure out how much gold you should buy. To do this, you need to find your target allocation percentage. Since you want to invest 10% of your assets, you’ll want to divide 10% by 100 to get 0.1. Once you have 0.1, you can find your total asset value on the spreadsheet.
In this example, your target allocation is $2,500 worth of gold. $2,500 worth of gold = 200 oz. So, once you have your target allocation and total assets, you can simply plug these numbers into the formula below to figure out how much gold to buy: $2,500 x oz/oz = investment amount. This formula can be used to determine how much gold to buy for any target allocation percentage. The only thing to keep in mind is that this formula only works if your assets are worth $250,000 or more.
The Factors You Should Consider Before Investing in Gold
Before you rush out and buy gold, it is important to consider some factors first. People often invest in gold at the expense of their financial goals, which is a mistake. You should always invest in a way that makes sense for you. For example, if you’re planning to have children in the next several years, buying gold is not a good idea. You should be investing in ways that will provide you with the highest return possible, not the most stable investment.
To help you decide if investing in gold is a good idea, consider these factors:
- Is a rising cost of living concern for you? Gold is a great hedge against inflation, but it is also very volatile. If you fear a rising cost of living, you may want to invest in other ways that are more stable.
- What are your financial goals? You should always invest in a way that makes sense for your specific financial goals. If gold is not a good fit for you, there are many other investments that can provide you with a higher return or help you achieve your financial goals, such as stocks.
- How much disposable income do you have? Gold is an expensive investment, and it’s important to know if you have enough money to put towards it.
How to buy gold as an investment
Now that you’ve decided to buy gold as an investment, you’ll want to find a reputable gold broker. The next step is to set up a gold IRA with your chosen broker.
When setting up your IRA, you’ll want to consider several factors:
What type of gold coins do you want to buy? Gold coins come in many different types, which can provide different benefits. For example, American Gold Eagles are the most popular coin in the world and are typically traded at a premium. You can also buy American Gold Buffalo coins if you’re looking for a lower premium.
- What type of storage do you want? Gold storage is a must if you want to keep your gold coins secure. You’ll need to decide between a long-term or short-term storage solution.
- Do you want to invest in physical gold or ETFs? Physical gold coins and bars are the best way to buy gold, but you can’t buy this type of gold without an IRA. If you don’t have one, you’ll want to invest in ETFs instead.
- What are your risks? This is an important factor to consider, as many gold brokers offer low-cost futures contracts that offer high-risk returns. It’s important to know the risks of each contract type so that you don’t get lured in by low returns.
Before you start investing in gold coins and bullion, you should keep in mind a few factors that may make investing in gold risky. Gold is a finite resource, and there will only be so much of it in the world.
If the demand for gold continues to rise, then the price of gold will most likely rise, which means that the profits that people can make by investing in gold will decline.
How to buy gold for yourself
If you want to invest some of your savings in gold coins and bullion, you can buy gold for yourself. This is a good way to test the water and make sure that you’re ready for a significant investment in gold before you take the plunge and invest your savings.
When you buy gold for yourself, there are two ways you can go about it. You can choose to buy physical gold, or you can choose to buy an investment gold bullion like the GLD fund.
Physical Gold: Physical gold refers to gold coins and gold bars. The most affordable way to buy physical gold is to buy coins directly from a gold dealer. Most gold dealers will sell you coins and bars in sizes as small as 1/10 oz up to 100 oz.
Depending on how much gold you want and how much you’re willing to pay, you can get coins and bars for as little as $10 to $1,000 or as much as $10,000 or more. Coins and bars from reputable dealers and refineries are of high quality and worth the price. You can also sell coins and bars to a gold refiner or coin dealer at any time.
Gold Bullion Investment: Investment in gold bullion is usually pooled gold bullion that comes in 1 oz bars or various sizes. Depending on the combination of coins and bars that you purchase, the investment gold bullion may or may not be stored in a vault.
Investing in gold is a great way to hedge against inflation, fiscal fluctuations, and political instability. However, it’s important to know how much you can afford to spend on a daily basis and how much disposable income you have. You can also calculate how much gold you need to buy to cover your expenses for a year.
Once you have this figure, you can buy gold coins or ETFs through a gold broker. Investing in gold is not for everyone, but it’s a great way to protect your money.
If you’re ready to take the plunge, and one other way to find a reputable gold broker is on the Commodity Futures Trading Commission’s website. We have listed basically all of them on this website also so feel free to use the search bar and look for the particular ones you are interested in!
With that being said, I hope you found this short article to be helpful and that you now have a better understanding on the subject! Please share your own experience and opinions below, and feel free to share this article with a friend, they might thank you greatly for it!
I wish you success!
Glanz, investor and team member at Gold Retired!