As with every passing year, it is a good idea to evaluate various investment options and see whether they are still relevant in the current economic scenario. The same principle applies to precious metals and investing in them. For the average investor, the options are gold bullion or stocks. There is currently a small bit of trepidation in investing in this precious metal right now, simply because it is believed to have reached its peak. Stock markets too are viewing it with some skepticism. This does not mean that it is not a viable option. It definitely is, but one will have to figure out the best way to invest in order to manage their private finance.
Experts feel investing in physical bullion
Experts feel that investing in physical bullion remains the top most option. With the actual mass in your hands, you will have a definite means of profit because it acts as a hedge in times of inflation. It helps in tackling the many problems that exist in the American economy. Always keep in mind that when you are investing, you have to look into dollar cost averaging. This means keeping aside a certain amount of money to invest with each month. This works well for the average investor, as it is not a burden, and the risk is spread out. It is advised that you invest 3 to 10. For more aggressive investors, going up to 20 percent is possible. There are four basic ways in which you can invest in gold.
Four basic ways in which you can invest in gold
Bullion is one you can start with; this can be coins, bars or even jewelry. There are popular coins that one can invest in, like the American Buffalo. These can be stored in a safe place at home or in the bank and you can easily sell them to your jeweler for a premium when the time is right. They can even be traded as precious metal. If you want to understand the premium on the precious metal in which you are investing, you should take the spot price and deduct that from the quoted price of the product. Divide the resultant figure by the spot prize and then multiply that by 100. This is best for long term investors.
Gold exchange-traded funds are another way of expanding your investment portfolio. This way you can invest, but you do not have to physically keep them in the house and worry about their safety. As a first timer, you should think about investing in any one of the ETFs that are physically supported, and keep track of the changing spot prize. You could do your own research to see which is a good one for you to put your money in or you could approach your financial adviser for some help. In general, for every share that you own, you also own around 1/10th ounce of gold.
The kind of gold for ETFs also varies and it can be either allocated or unallocated. The first one is stored with the likes of banks and the second with investment houses like JP Morgan and Goldman Sachs.
The third kind of investment is in ETNs. If you are up for some risk, then exchange traded notes are for you. You hand over your investment money to a bank that will provide you with returns that are dependent on how the ETN performs. There are several popular ones that you can invest in depending on the how you plan your finances.
The final option is that of miner stocks. This carries a larger risk, but they can influence gold stocks in a 3 to 1 ratio. This risk is higher here because of the expanse of the equity market.