Gold is considered the ultimate symbol of wealth and prosperity. It has always been one of the favorite assets of investors for a variety of reasons.
Gold is known for being a solid portfolio diversifier. It tends to become more attractive in times of a crisis like the current pandemic since it’s considered the safest asset class and a good hedge against inflation. That said, like any other asset, investing in or buying gold without the facts can only push you towards failure.
So, if you’re thinking about investing in gold— whether as part of your investment strategy or for sentimental reasons, or both— here are a few things you should keep in mind.
Gold Stocks And Physical Gold Are Different
You’ve probably heard that some investors like to invest in gold stocks to increase exposure to gold. However, you need to know that investing in stocks doesn’t mean you’re investing in the actual physical gold.
In general, you’ll be investing in a company that mines or produces physical gold. But you’re not actually investing in gold itself.
So, if you want to add exposure to gold but don’t want to purchase the physical commodity, then gold stocks are a great choice. Take note, however, that gold stocks can fluctuate in value with the rest of the market, depending on the situation.
The Amount Of Gold You Can Own Is Limitless
If you want to buy a physical commodity, you might be wondering about how much gold can you own. In general, there’s no limit on how much gold you can own.
For instance, in the US, there are no legal restrictions or limits on how much gold an investor in the US can have. As long as you can afford to buy and store your gold, you can buy as much of it as you want.
That said, in some countries like India, although there’s no legal limit on how much you can have, they have strict rules about the need for investors to document the source of the investment. If your investment portfolio doesn’t line up with your income level from your tax returns, you run the risk of having the government seize your excess gold in tax raids.
As mentioned, there’s no limit on how much gold bullion you can own or buy. You can hold as much as you can afford and purchase. Should you decide on putting your hard-earned money into physical gold, you have to seek reputable distributors like guardian gold. This is especially crucial if you invest a massive amount. Therefore, practice good judgment and careful thought when purchasing gold.
Physical Gold Needs A Place For Storage
Buying gold can result in numerous responsibilities, especially if you choose to invest in gold bullions. For starters, you want to prepare a place to store your gold. You need to keep it in a high-quality safe or a secret room. The level of security is up to you.
Aside from storage with a high level of security, gold must also be kept in a place protected against high humidity and fluctuating temperatures. That said, you must carefully choose where to keep your physical gold to ensure security and a proper environment.
Most distributors also offer storage services with a high level of security and 24/7 surveillance.
Also, you have the option to use the deposit boxes from local banks. If you don’t trust the security of your local banks, you can pay for facilities with specialized gold storage.
Gold Certificates Are Prone To Scams
Gold certificates are legal documents showing proof that you own a certain amount of gold. So, while you can’t hold or see the gold, you have proof that you own or have a gold investment.
In general, investors get gold certificates to save money in spending delivery, storage, and trading of physical commodities. Instead, you get a piece of paper that you can hold physically and evidence that you own gold.
That said, these certificates are prone to scams. Scammers often sell fake gold certificates. Thus, you must verify your broker before buying a gold certificate from them.
Remember to practice prudence when buying a gold certificate and only deal with reputable sellers with a solid background. You wouldn’t want all your life savings to go down the drain just because you got blinded by a very inconceivable offer by fraudsters.
You Need To Pay Extra Fees
If you’re buying gold for the first time, you’ll notice that the amount you pay is often higher than the price that your broker advertises on their platform. The price you see at gold trading platforms is called the “spot price” or the current price in the market. However, this isn’t the final price you have to pay.
Dealers will charge you extra costs known as “gold premium” which often includes the dealer’s fee as well as extra costs for the distribution and manufacture of this precious metal.
Consequently, if you would like to sell your gold, you’ll also be selling to a dealer which also requires you to pay a certain percentage below the gold’s spot price.
Take Away
Investing in gold can help diversify your portfolio and safeguard it against current or future economic uncertainty. However, buying gold isn’t as simple as what you see in films.
Studying gold well should be your priority if you’re bent on this type of investment since gold doesn’t move the same way as other investments like stocks and bonds. Gold may look insusceptible to market volatility, that’s why many people would say it’s a safe investment, but what’s often overlooked is the strategy on when to buy it.
So, before investing your capital in gold, make sure to keep the above pointers in mind. We hope that we have provided the necessary information to strategically use gold in your portfolio and maximize your profits from your investments.
