Here are five different ways to get into the gold business and some of the risks that come with each strategy gold ira companies.
Buy gold bars or coins
One of the most satisfying ways, at least emotionally, is to buy gold bullion or coins. Think that here you can have gold at your disposal, as well as see and touch it whenever you want. Of course, choosing this option also has some disadvantages, especially if you have a considerable amount, since you will have to pay to protect and insure it.
Risks: The biggest risk with this strategy is someone stealing your gold. The second biggest risk is that you need to sell the gold quickly. Keep in mind that it can be difficult to find someone who wants to buy your gold on the market, especially if it is coins and you need the money instantly. In that case, you could end up agreeing to a much lower price than you would normally get.
Invest in the gold futures market
Gold futures or “g old futures” are a way of speculating on the rise or fall of the price of gold. With this you could even receive the metal physically, although it is not precisely this factor that motivates the speculators.
Risks: Leverage for futures market investors is a double-edged sword. If gold goes against you, you will be forced to pay large sums of money to keep the contract, or else the broker will close the position. So even if the market of the future allows you to make large amounts of money in a short time, it can take it away just as quickly.
Generally speaking, the futures market is designed for sophisticated investors. To enter it, you will need a broker who is responsible for futures trading. Ask your trusted broker very carefully about this option, since not all of them specialize in this service.
Enter the world of gold ETFs
If you don’t want to take the risk of having gold as an investment in your home or in a safe deposit box, then buying an ETF (Exchange Traded Fund) or exchange-traded fund that tracks the price of the commodity would be a great alternative. The three largest ETFs in the world include the SPDR Gold Trust, the iShares Gold Trust and the Aberdeen Standard Physical Swiss Gold Shares ETF. The goal of ETFs like these is to make a calculation that takes into account the performance of gold in the market minus the annual expense ratio. To give you an idea, this relationship was 0.4%, 0.25% and 0.17% (respectively) for the month of May 2020.
Risks: ETFs give you full access to the price of gold. If its value rises or falls, your funds will too. To this you must also subtract the cost of the transaction. As with stocks, gold can be volatile, although this is not always the case.
Benefits: Another aspect that you should consider is that with ETFs you will not have to deal with physical gold. Therefore, you will be able to get rid of the risks involved in buying physical gold, such as the lack of liquidity, the difficulty in obtaining the full value of your investment and the costs of storage together with the protection and insurance mechanism of the asset.
Trade shares of mining companies
Another way to take advantage of rising gold prices is to invest in mining companies that exploit or produce the material. Many people consider this to be the best alternative for investors because they will be able to earn profits in other ways as well. First, if the value of gold increases, the profits of the mining companies will also increase.
Second, the mining company has the ability to increase production over time, creating a higher profit effect. So, with this option, you have two ways to win, and that’s better than relying on just one.
Risks: If you prefer to invest in individual stocks, you need to understand how the business works. There are countless mining companies that face great risks. Therefore, you will want to be very careful when selecting a player from this industry. It is best to stay away from small companies and those that are not yet working in a mine. Finally, keep in mind that, being a stock, volatility will always be a risk.
Buy ETFs that own shares of mining companies
The largest in this sector include the VanEck Vector Gold Miners, the VanEck Vector Junior Gold Miners, and the iShares MSCI Global Gold Miners ETF.
Risks: Although diversified ETFs protect you against a company’s poor performance, they will not protect you against changes that affect the entire industry, such as the sustained decline in gold prices. Our recommendation? Be very careful when selecting the background: they are not all the same. Some work with well-established miners, while others integrate the youngest and most risky in the market.
Investing in gold is not for everyone. That is why there are some investors who keep their bet on cash flow trades instead of trusting someone else to pay for the precious metal. That is one of the main reasons why legendary figures like Warren Buffet do not recommend investing in gold. He thinks that buying stocks and funds is quite simple, this without counting on his liquidity. If you bet on this move, you can exchange your position for money at any time you need it.