This post is going to be about gold stocks. What is gold stocks? Is it for you or should you focus on physical gold instead? Let´s break down the difference in an easy to understand way for you so you understand the topic better!
Before we start, make sure to always do your own research before you invest in precious metals with any company, there are so many scams and rip-offs taking place in this industry so please be sure of exactly what you are going to pay for before you sign anything.
Gold Stocks: All You Need to Know
By the time you think of owning gold, you must be at an impressive stage of wealth. Congratulations! Now, before you get too excited about owning gold, you should make some considerations. Of course, it is a sense of financial security; owning gold means you are above worries of currency fluctuations. Nothing about inflation will concern you when you own gold. The value is always increasing.
There are two considerations when buying gold; either gold stocks or physical gold.
What is gold stocks? – the difference?
Physical gold entails the shiny metals often associated with gold. In most cases, gold is in form of coins or bars. You can be more creative and store your gold in different shapes. I mean, if you have the capability of buying gold, you can have all your preferences. However, smaller pieces of metal are more expensive because it takes more time and energy to shape them into small sizes.
On the other hand, gold stocks mean you own a piece of paper that shows your investment. Basically, you are the owner of metals that someone else has in possession. You can choose to buy funds that hold gold or buy a company that produces gold. There is no piece of metal involved in gold stocks.
Should you buy gold stocks?
When buying stock options, the only costs you have to incur is related to broker and transaction costs. The exchange rates may vary depending on the number of stocks you buy. This is different from physical gold where you have to pay a premium price above the market value of metals you intend to buy. The premium varies depending on the number of metals or value of the metals. Also, you have to pay for security as part of transport costs whether you are the seller or buyer.
With gold stocks, the transaction is quick. Payment is processed in minutes and you will receive your papers attributing to ownership of gold in a few days. This is unlike physical gold where you will have to pay for shipping and wait for several days to weeks depending on the location of the seller. Nevertheless, physical gold has an incomparable advantage; if the financial markets are unfavorable, you can use the coins, bars, or whichever shape your metal is and trade with them.
Should I buy physical gold?
The first consideration you should think of when buying physical gold is the storage. It is a precious metal and while it guarantees you financial security, it also exposes you to other risks. Gold is vulnerable to theft; once people are aware you are in possession of the metal, they can go to any extent to ensure they snatch it from you. Gold can cost your life.
Before the shipping process begins, you should make plans for storage. You can build a safe in your house or keep it in a safe deposit box in the bank. While these are the safest options, they are still prone to theft. You can also store the gold in name of a company where you spread the risk; however, you also risk losing the gold coins to creditors in case the company goes out of business.
The main reason people store gold in their houses is that they want quick access and the pride of ownership. However, it exposes you to more risks than storing them in a bank or under a company’s name. Of course, you will incur extra costs with respect to insurance while storing in a bank.
Here are some important factors to consider:
If you are up for physical gold, your focus is obviously on the metals. The thrill and pride that comes with owning the bars or coins are irreplaceable. Some people shy away from gold stocks because of the currency value effect. When you buy stock in a company instead of a fund, the company has control over price, which defines your earnings.
Also, your investment is pegged on decisions of the company management; if they fail to manage the gold, the stock will go down and they will be unable to mine. Just like other stock options, gold stocks are prone to changes by various factors in the market. They are also easier to trade; if you want to add or sell part of your gold stock, it is easier than with physical gold.
Buying gold can be a good retirement investment idea. You can put all your savings in an individual retirement account by buying stock in gold mining companies or still buy and store gold metals. Gold is highly regarded and you need a self-directed IRA to own even one metal. Each of the investment options is reliable and can stabilize your finances for a long period. The IRA requires you to buy pure gold of at least 99.5%. Irrespective of the number of coins and value of your gold, most of it must be pure, to be recognized to be part of the revenue service.
Both gold stocks and physical gold have their advantages and disadvantages. You have to be timely in your investment and balance your pride and financial security. Diversification of investments is the best option. Watch the stock options and market trends to avoid holding on to physical gold while the value is changing.
Personally, I would go with the real deal, meaning physical gold that you can hold in your hand instead of paper gold.
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I hope you found this short article on gold stocks to be helpful and now you should have a better understanding of what it is and if it is something for you or not. Please share your own experience in the comment section below as it can help others. Also, if you got any questions about this I would be more than happy to answer them below!
I wish you the best!
founder of: Gold Retired