Which is the safest gold investment? What are your options anyway? Should you actually consider taking up gold investments today, or should you stay away from them regardless of the purported safety or security that they offer? Join me in today’s article, in which I shall be presenting you with the answers to the above questions. Read on to discover what lies in store for you.
See my top recommended gold & silver IRA service, providers
Gold as an investment option
Since time immemorial, gold has been perceived as a valuable currency. In the present day world, it is used by investors for various purposes. Decades-long studies have revealed that gold is one of the few assets that hold their value over time and that one should consider taking it up to shield themselves from the adverse effects of economic downturns. Generally, gold has become the asset that investors are encouraged to take up to minimize the overall portfolio risk.
What then are your options when it comes to investing in gold in a manner that provides the most assurance as far as the safety of your portfolio is concerned?
Gold investment options
In the present-day world, if you want to get started with gold investing, you have the options listed below (all with different degrees of safety):
This is the best-known approach to the ownership of gold. Whereas many people perceive gold bullion as massive gold bars in national depositories, gold bullion is simply any pure form of gold whose weight and purity have been certified as investment grade. This includes gold coins, bars, etc. of different sizes. There’s usually a serial number on gold bullion, for security and verification purposes.
Whereas the large gold bars are a sight to behold, their large size (they are heavy and can weigh up to 400 troy ounces), makes them illiquid, and areas such quite costly to purchase and sell. After all, you do not want to end up with a massive gold bar worth $100,000 that you cannot break into smaller pieces when you decide to sell 15% of your gold holdings.
Smaller-sized bars and coins, however, provide much more liquidity and are the most common holdings amongst gold owners. In as far as I can tell, owning physical gold is your safest bet as a beginner or expert in this industry. Note that I am not talking about earning potential, although physical gold still has great growth potential, but safety.
Safety in this case refers to the peace of mind that an investment presents in terms of having low to zero volatility during economically challenging times. Whenever the global economy is being shaken up, most investments fall into the cracks, and most investors are often left counting their losses. Well, all of them, besides those who invest in physical gold, which has in the past several decades proven to be the safe haven to run to whenever the global financial situation is a mess.
Gold ETFs and mutual funds
If you cannot afford to purchase physical gold, which is the safest gold investment, then you can turn to gold exchange-traded funds (ETFs). Every share of any type of ETF represents a fixed amount of gold. This makes it possible for these funds to be traded like stocks, through a brokerage or an IRA account.
Gold ETF ownership is more cost-effective than the ownership of gold bullion (coins and bars), especially for the small investors, since the minimum investment is in most cases usually the price of a single share of that ETF.
Those who invest in gold through the ETF options should be ready to meet the annual expense ratios, which are usually about 0.65% of one’s holdings. For mutual funds, one has to meet the fees and charges required to manage the investment in the best possible manner.
Funds may not offer you the same level of safety as that presented by physical gold, but they can offer the following benefits:
- Low cost and low minimum investment is needed
- Diversification across different firms
- The ease of ownership through a brokerage account or n IRA.
- Fewer demands for the research on individual companies.
Gold futures and options
Gold futures are unique contracts to purchase or sell a certain amount of gold on a specific date in the future. Futures are usually traded in contracts, not shares, and they usually represent a given amount of gold. Since the amount of gold involved in this case is quite large, futures are best left to experienced investors. Commissions charged on gold futures are quite low, and the margin requirements are equally low (lower than those of traditional equity investments).
Options on gold futures are usually the alternative to purchasing futures contracts outright. These usually present their owners the right to purchase futures contracts within a given time frame, at a predetermined price. A major benefit of options is that they leverage one’s original investment and limit the losses to the price that the investor pays.
Futures contracts that are purchased on margin may require the pumping of more capital than was originally invested if the losses pile up quickly. Also, owing to the very volatile nature of futures and options, they may not be very suitable for most investors (they do not offer the safety that we are interested in, in this case). Even so, futures are the most affordable options in terms of the commissions and interest expenses, when purchasing or selling gold, involving large sums of money.
Ready to start investing in gold, check out the recommended gold & Silver IRA custodians below:
That will be all for this article, in which we have answered the question, “Which is the safest gold investment?”. I hope you now have the information to help you make the right decision as you get started with gold investments today. Let me know if you have any questions regarding today’s topic, as well as whether would need some help as you seek ways to add gold to your retirement investment portfolio.
I wish you well,
Eric, Investor and Team Member at Gold Retired!