Different Ways to Invest in Gold

Gold has always been a prized investment because it has provided steady returns over the last several decades. It is also the safest form of investment, as the gold market has never crashed in the past. Further, gold can be stored easily and can be quickly converted to cash when needed. Due to all these advantages, many investors like to have gold as a part of their portfolio.

If you've decided to invest in gold, here are some different ways to go about it.

Bullion or gold coins

One of the most popular ways of investing in gold is buying bullion or gold coins. The obvious advantage with this option is you get to have the physical asset with you, so you can sell it just when you want. This is why investing in bullions gives you the highest exposure to this asset.

The downside to this option is that you'll have to find a safe place to store gold. If you're looking to buy in large quantities, then you should consider insuring it too. These costs of storage and insurance are hidden costs that are not only recurring, but can also add significantly to the cost of your investment. When you factor in these costs, your returns may diminish.

Mining stocks

If you want to benefit from the surge in gold's price without being exposed to it directly, then mining stocks are a good choice. These mining companies are those involved in extracting and purifying gold, so when the price of gold goes up, their profit margins tend to increase. In turn, the stock prices of these mining companies will go up too, thereby making it a good return on your investment. However, when you opt for this choice, you're exposing yourself to the operating risks of the company. The shares of the company will fall even if the price of gold goes up due to a host of external and internal factors. This way, you may have to take a loss even if the price of gold climbs.

ETFs and mutual funds

For novice investors, ETFs and mutual funds that specialize in gold are a good bet. Mutual funds invest in different gold mining companies, so you have a cushion even if a few companies fare poorly due to operational inefficiencies. Gold exchange traded funds like GLD and IAU hold gold bullion as their only asset, thereby offering a convenient way for you to be directly exposed to this metal without having to worry about its physical storage.

Gold futures

This avenue is more ideal for experienced investors who trade in the futures as you have to speculate on the price of gold, and make your profits from the margin between your option price and gold's current price.

Thus, these are some ways to invest in gold. The choice of an investment depends largely on your financial goals and personal preferences. If you think, "I should buy and sell my gold at the right time", then physical gold works best. If you're too keen or holding gold or using it for making ornaments, then any of the other options are a good choice.