HOW TO INVEST IN GOLD
INVESTING: WORK FOR YOU MAKING YOUR DOLLARS
HOW TO INVEST IN GOLD While it’s possible to invest in various precious metals, gold remains one of the most popular precious metal investments. The most common reason for investing in gold is the diversification of risk. Many financial experts encourage including gold in an investment portfolio. Fortunately, it isn’t necessary to own a 28 pound brick of gold to be a gold investor. At one time, gold was used as money to pay for goods and services. While gold is occasionally transferred between countries, most of the mined gold in the world is locked away in vaults and never sees the light of day. There is far more gold in the world than will ever be needed for industrial purposes. Only a small amount is used commercially. The value of gold is primarily determined by what people are willing to pay for it. The supply of gold has minimal effect on the price.
1 JohnMLesko.com
‣ THERE ARE 6 WAYS THAT THE AVERAGE PERSON CAN INVEST IN GOLD: 1. Own gold directly. Physical ownership of gold is one possibility. However, owning physical gold isn’t always a simple matter. You can purchase gold in the form of bars, coins, and jewelry. Consider that a few challenges exist with this method:
‣
Storage. Do you want to put $50,000 worth of gold in the shoebox in your closet? You can pay someone else to store it, but that isn’t free. A bank safe deposit box might seem like a good idea. Storing gold at home or at a bank isn’t risk-free.
‣
Insurance. The average bank won’t insure gold in a safe deposit box. Your homeowner’s policy won’t cover it either without an additional rider. And they’re going to want a safe and an alarm system. A safe rated against burglary isn’t economical, either.
‣
Transaction fees are another expense. Standard gold purchases are much like stock purchases. You pay over the current price when you buy and receive under the current price when you sell.
2 JohnMLesko.com
‣
Keep in mind that retail gold jewelry is marked up as much as 450%. The only good deals will be on the used market.
2. Invest in companies that mine gold. Companies that mine gold eventually have to sell it. If the price of gold rises, they make more money.
‣
Mining companies aren’t as volatile as the price of gold, so they are a more stable investment.
‣
Many mining companies also hedge against falling gold prices. Also remember that mining companies don’t have to immediately sell the gold they mine.
‣
As with other stock investments, it’s important to research the mining company’s financials and prospects for the future.
3. Exchange-Traded funds are another option (ETFs): Each share of a gold ETF represents a specific amount of gold, often one-tenth of one ounce.
‣
Gold ETFs have very low fees. An annual expense ratio of 0.5% is common. This is less than the majority of regular mutual funds.
3 JohnMLesko.com
‣
The minimum investment is very low. You can purchase or sell a single share.
‣
Gold ETFs are easily liquidated. The shares can be bought and sold on the open market from your brokerage account like other conventional investments.
4. Mutual Funds. While many mutual funds invest in physical gold or gold related businesses, there aren’t too many that invest solely in the gold industry. These share many of the same advantages of ETFs, including low cost and a low initial investment.
‣
You have a higher level of diversification. Mutual funds are required by law to limit the amount that can be invested in a single company.
‣
You don’t have to research the companies yourself. You have an expert fund manager at the helm.
‣
A few funds invest in different indices tied to segments of the gold industry or to the price of gold itself.
‣
Mutual funds and ETFs are the easiest and safest way for investors to get involved with gold.
4 JohnMLesko.com
5. Gold Futures. A futures contract requires the holder to buy or sell a particular amount of gold, at a particular price, on a particular date in the future.
‣
Futures are best left to experienced investors with deep pockets. A typical futures contract might require the investor to purchase or sell an amount of gold worth hundreds of thousands of dollars.
‣
If you are confident that you can predict the future price of gold, gold futures are one way to make a lot of money quickly.
6. Gold options are another way to invest in futures with less cash. Instead of buying a futures contract outright, you can purchase the right to buy or sell a specific amount of gold, at a predetermined price, before the end date.
‣
You can never lose more than the price paid for the option. If the price of gold isn’t agreeable before the option expires, you don’t exercise the option.
‣
Most options expire without being exercised. However, if luck or expertise is on your side, options are a powerful way to control a lot of gold for a relatively small amount of money.
5 JohnMLesko.com
Gold prices are very challenging to predict. This is especially true since the supply of gold has little to no effect on the price. Investor sentiment largely dictates the price. Can you predict how people will feel about gold in the future? Owning gold bullion sounds exciting. Who wouldn’t want to have 500 gold bars hidden under the floor in the basement? But actual gold is subject to theft or damage. The shipping, storage, and insurance fees can be very high. Options and futures are for those with money to burn and ironclad stomachs. The average investor would be wise to consider mutual funds and exchange traded funds. Let the experts make the hard decisions while you enjoy the low fees and low volatility. A little gold in your portfolio could be a good idea, but dedicating your entire future to the price of gold is risky.
6 JohnMLesko.com
HOW TO INVEST IN GOLD While it’s possible to invest in various precious metals, gold remains one of the most popular precious metal investments. The most common reason for investing in gold is the diversification of risk. Many financial experts encourage including gold in an investment portfolio. Fortunately, it isn’t necessary to own a 28 pound brick of gold to be a gold investor. At one time, gold was used as money to pay for goods and services. While gold is occasionally transferred between countries, most of the mined gold in the world is locked away in vaults and never sees the light of day. There is far more gold in the world than will ever be needed for industrial purposes. Only a small amount is used commercially. The value of gold is primarily determined by what people are willing to pay for it. The supply of gold has minimal effect on the price.
1 JohnMLesko.com
‣ THERE ARE 6 WAYS THAT THE AVERAGE PERSON CAN INVEST IN GOLD: 1. Own gold directly. Physical ownership of gold is one possibility. However, owning physical gold isn’t always a simple matter. You can purchase gold in the form of bars, coins, and jewelry. Consider that a few challenges exist with this method:
‣
Storage. Do you want to put $50,000 worth of gold in the shoebox in your closet? You can pay someone else to store it, but that isn’t free. A bank safe deposit box might seem like a good idea. Storing gold at home or at a bank isn’t risk-free.
‣
Insurance. The average bank won’t insure gold in a safe deposit box. Your homeowner’s policy won’t cover it either without an additional rider. And they’re going to want a safe and an alarm system. A safe rated against burglary isn’t economical, either.
‣
Transaction fees are another expense. Standard gold purchases are much like stock purchases. You pay over the current price when you buy and receive under the current price when you sell.
2 JohnMLesko.com
‣
Keep in mind that retail gold jewelry is marked up as much as 450%. The only good deals will be on the used market.
2. Invest in companies that mine gold. Companies that mine gold eventually have to sell it. If the price of gold rises, they make more money.
‣
Mining companies aren’t as volatile as the price of gold, so they are a more stable investment.
‣
Many mining companies also hedge against falling gold prices. Also remember that mining companies don’t have to immediately sell the gold they mine.
‣
As with other stock investments, it’s important to research the mining company’s financials and prospects for the future.
3. Exchange-Traded funds are another option (ETFs): Each share of a gold ETF represents a specific amount of gold, often one-tenth of one ounce.
‣
Gold ETFs have very low fees. An annual expense ratio of 0.5% is common. This is less than the majority of regular mutual funds.
3 JohnMLesko.com
‣
The minimum investment is very low. You can purchase or sell a single share.
‣
Gold ETFs are easily liquidated. The shares can be bought and sold on the open market from your brokerage account like other conventional investments.
4. Mutual Funds. While many mutual funds invest in physical gold or gold related businesses, there aren’t too many that invest solely in the gold industry. These share many of the same advantages of ETFs, including low cost and a low initial investment.
‣
You have a higher level of diversification. Mutual funds are required by law to limit the amount that can be invested in a single company.
‣
You don’t have to research the companies yourself. You have an expert fund manager at the helm.
‣
A few funds invest in different indices tied to segments of the gold industry or to the price of gold itself.
‣
Mutual funds and ETFs are the easiest and safest way for investors to get involved with gold.
4 JohnMLesko.com
5. Gold Futures. A futures contract requires the holder to buy or sell a particular amount of gold, at a particular price, on a particular date in the future.
‣
Futures are best left to experienced investors with deep pockets. A typical futures contract might require the investor to purchase or sell an amount of gold worth hundreds of thousands of dollars.
‣
If you are confident that you can predict the future price of gold, gold futures are one way to make a lot of money quickly.
6. Gold options are another way to invest in futures with less cash. Instead of buying a futures contract outright, you can purchase the right to buy or sell a specific amount of gold, at a predetermined price, before the end date.
‣
You can never lose more than the price paid for the option. If the price of gold isn’t agreeable before the option expires, you don’t exercise the option.
‣
Most options expire without being exercised. However, if luck or expertise is on your side, options are a powerful way to control a lot of gold for a relatively small amount of money.
5 JohnMLesko.com
Gold prices are very challenging to predict. This is especially true since the supply of gold has little to no effect on the price. Investor sentiment largely dictates the price. Can you predict how people will feel about gold in the future? Owning gold bullion sounds exciting. Who wouldn’t want to have 500 gold bars hidden under the floor in the basement? But actual gold is subject to theft or damage. The shipping, storage, and insurance fees can be very high. Options and futures are for those with money to burn and ironclad stomachs. The average investor would be wise to consider mutual funds and exchange traded funds. Let the experts make the hard decisions while you enjoy the low fees and low volatility. A little gold in your portfolio could be a good idea, but dedicating your entire future to the price of gold is risky.
6 JohnMLesko.com
