How to buy and invest in gold

These are five ways to own gold. We also discuss the risks associated with each.

1. Buy gold bullion

The best way to own gold is in bars and coins. Although you will enjoy the pleasure of touching and looking at gold, it also has its drawbacks. The biggest drawback is the need to protect the physical gold and insure the property.

Owners of physical gold must rely on rising prices to make a profit. This is in contrast with owners of businesses, which can produce more gold, and thus generate more profit.

There are many ways to purchase gold bullion. You can either buy it through an online seller like APMEX, JM Bullion, or a local dealer. You might also find gold in a pawnshop. You should note the spot price of gold when you buy it so you can get a fair deal. Bars are a better option than coins. You’ll pay more for the coin’s collector value than the gold content.

Dangers: If you don’t protect your gold, the biggest risk to you is someone taking it. If you have to sell your gold, the second-highest risk is that someone could take it from you. If your gold holdings are coins or you require cash quickly, it can be difficult to get the market value. You may need to sell your holdings at a lower price than what they would be worth on a national marketplace.

2. Invest in gold futures

You can speculate on the rise or fall in gold’s price by buying gold futures. However, that is not what motivates most speculators.

Futures are a great way to invest in gold. You can buy a lot of futures gold for a small amount of money. You can quickly make a lot of money if gold futures are moving in your favor.

Risks Futures investors have to be aware that leverage can work both ways. You will need to pay substantial amounts of money to keep the contract open if gold moves against your position. Otherwise, the broker may close it. The futures market can allow you to make large amounts of money but you could also lose it quickly.

The futures market is generally for sophisticated investors. You’ll need a broker that permits futures trading and not all the major brokers offer this service.

3. ETFs that hold gold

An ETF that tracks the commodity is a great option if you don’t want to deal with physical gold. The three largest ETFs are the SPDR Gold Shares, iShares Gold Trust and Aberdeen Standard Physical Gold Shares. ETFs like these are designed to achieve the same performance as gold, but with a lower annual expense ratio. As of July 2021, the expense ratios for these funds are 0.4 percent to 0.25 percent and 0.17 percentage, respectively.

An ETF is more easily exchangeable than bullion for cash at market price. The fund can be traded at any time the market is open, regardless of the current price. You can trade gold ETFs from the comfort of home as they are more liquid than physical gold.

Risks ETFs offer you exposure to the gold price. If it rises or drops, the fund should also perform similarly, again without the expense of the fund. Gold can sometimes be volatile, just like stocks. These ETFs do not own physical gold. However, they can help you avoid the most dangerous aspect of owning physical gold: the difficulty in obtaining its full value and illiquidity.

4. Invest in mining-related stocks

You can also profit from rising gold prices by owning the miners that produce it.

This may be the best option for investors because they can make multiple profits on gold. First, miner profits will rise if gold prices rise. The miner can increase production over time which creates a double win. You have two options to win. This is better than relying solely on the rising gold price to boost your investment.

Risks Before you invest in individual stocks, it is important to fully understand the business. There are many highly risky miners in the market. You should be cautious about choosing a reputable player in this industry. Avoid small miners and mines that aren’t yet producing. Mining stocks can also have volatile prices, as with all stocks.

5. ETFs that hold mining stocks

You don’t need to invest in individual gold companies. An ETF might be a good investment. ETFs that target gold miner ETFs can give you access to the largest miners on the market. These funds are diversified across the sector so you won’t feel any impact from the performance of anyone miner.

VanEck Vectors Gold Miners (GDX), VanEck Vectors Junior Gold Miners (GDXJ), and iShares MSCI Global Gold Miners (RING) are the largest funds in this sector. As of July 2021, the expense ratios for these funds were 0.51 percent 0.52 percent, and 0.39%, respectively. These funds combine the benefits of owning individual miners and the safety of diversification.

Risks The diversified ETF will protect you from any company going under, but it won’t protect against an industry-wide event like low gold prices. Be careful when selecting a fund. Not all funds are the same. Some funds have established miners while others have junior miners, which can be riskier.