Ways to Gain Exposure to Gold Investments

 Ways to Gain Exposure to Gold Investments

There are many ways through which you can invest in gold. Each of the following methods offer unique advantages as well as inherent disadvantages. If you want to hedge your investments and invest in gold, check out the following ways.

Gold Bullion

Investing in gold bullions is arguably the most popular form of investing in gold. Many people think that gold bullions are large gold bars tucked away in high security places.

But in reality, gold bullion refers to the any form of pure or nearly pure gold that has been certified for its purity and weight.

Gold bullion includes gold coins and bars of any size. There is a serial number commonly attached to gold bars as well, for security.

Although heavy gold bars are visually pleasing, their sheer sizes make them illiquid, meaning they are very costly to buy and sell.

Meanwhile, gold bullions held in smaller sizes in the form of bars and coins offer much more liquidity. They are also quite common among gold owners.

Gold Coins

For decades, huge quantities of gold coins have been given by sovereign governments around the world.

 Gold coins have great advantages like their prices are available in global financial news outlets. They are also often minted in smaller sizes, making them a better choice for convenience over gold bars.

You can also find reputable dealers with minimal searching. They are usually located in many large cities.

The primary problem with gold coins is that the storage and insurance cost are pretty expensive.

ETFs and Mutual Funds

One alternative to direct purchases of gold bullion is to invest in one of the gold-based exchange traded funds in the market.

Every share of these specialized instruments represents a certain amount of gold. You can buy and sell these funds in a manner similar to stocks in any brokerage accounts.

Therefore, this strategy is easier and more cost-efficient that owning actual bars and coins directly. At the same time, the annual expense ratios of these funds are usually less than 0.5%, much less than the fees and expenses on many other investments.

Meanwhile, many mutual funds own gold bullion and gold companies as members of their portfolio. However, it’s wise to remember that only a few mutual funds focus solely on gold investing. Many of them own many other commodities.

From mutual funds that focus on gold, you can get low cost and low minimum investments. You also achieve quick diversification among different companies.

Gold Futures and Options

Futures are contracts to buy or sell a specific amount of an item, such as gold, on a specific date in the future.

Futures trade in contracts, not shares, and represent a specific amount of gold. And because these amounts can be quite large, trading futures are typically more suitable for experienced investors.

Options, on the other hand, are alternative to buying a futures contract. Options give you the right but not the obligation to buy the futures contract within a certain time frame at a predetermined price.

Options are great because they leverage your original investment while also limits the losses to the price paid.

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Paul Petersen