One of the most common advice you can get about investing is to diversify your investment and thus avoid risks and have a safety net in case one of your investments doesn’t come through. This is mostly done by getting into real estate, buying a wide portfolio of stocks or looking into peer to peer investing.
But, there’s one more way to go and it’s buying gold. With the current price of gold on the world market, the idea doesn’t seem outdated at all; in fact, it could be one of the best investments to make this year.
Inflation
Commodity prices have been on the rise for a while now and they are going to continue to rise in the foreseeable future. At the same time, the value of the US dollar is declining due to the role of China now has in the global economy. Many people are looking for a way to invest in a way that will be inflation-proof.
Gold is the answer to this problem because its value remains constant due to the fact that there’s a limited amount of it in the world. Prices can vary due to demand, but there’s always going to be the need for gold.
Its use in different Industries
Gold is used in a variety of industries. It’s obviously used to make jewelry and accessories, but it’s also very much needed in the tech industry for a lot of different purposes. The need for it will only rise as the tech gets more complex and even more present.
This means that you can go into individual deals with particular companies and hedge your bets on this deal, depending on how much gold you have bought and how fast you need to move it.
Legacy Investments
Gold is a good legacy investment. If you want to invest in the future of your children and avoid all the potential risks that could occur with such a long-term plan, gold is a way to go. It won’t be affected by government policy, taxes or any other issue that could come up.
It’s important to note, however, that this also means that gold has relatively slow and small returns. The price of gold is on the rise, but it rises slowly and you’ll be able to make money on gold only in the long run, which is why you should leave it to your kids.
How to Invest?
There are a few ways to buy gold and each has its own advantages and disadvantages and you should consider this in the light of your needs and problems.
Direct Ownership
Direct ownership means what you think it does. It refers to buying gold directly in the form of coins, bars, and bullions. It’s a way gold was historically stored and it’s easier to transport that way. It’s also the purest way to invest because when you buy it there’s no middleman involved. The gold is yours and you can use it, sell it or move it whenever you want.
With this way of buying, you can’t make a quick profit, but you can be sure that it will remain there for years to come.
Gold Exchange Traded Funds
Exchange trade funds (ETF’s) have exploded in recent years and they are also a very exciting way to invest in gold. It’s a mutual fund that trades on trade stocks like any other stock and it has a few advantages over buying gold directly. It’s easier to make it a part of your portfolio this way and to sell quickly if you have the need to do so. You could also back some of your other investments with gold. It’s inversely correlated to risks, meaning that you should use gold as 5 to 20 percent of your portfolio. Otherwise, you might see a drop in the price of your assets, since gold doesn’t react to the changes in the economy.
The downside is that you need to pay taxes the same way you would for any other stock purchase and earning.
Gold is definitely a valuable option for investing, since it’s always in demand and risk-free. Have in mind that it should remain but a part of your investments.