In recent years, gold has risen to prominence as a favoured investment option, outshining traditional assets such as shares over the last two years. With this growing interest in gold in mind, we’ve simplified the complexities of investing in gold. In this article, we break down the three main methods for buying gold.
Buying physical gold
The first strategy we’ll explore involves visiting a local bullion dealer to purchase physical gold in the form of bars or coins. This traditional method offers tangible assets that you can hold in your hand, much like cash. However, like storing large amounts of cash, physical gold requires safe and secure storage, and any associated insurance, to protect against theft or loss. This often results in considerable storage costs and can introduce further complications, making it a less practical approach for most investors.
Investing in gold mining companies
The second method to consider involves buying shares in gold mining companies such as Newcrest or Evolution Mining. At first glance, this may seem simple; as gold prices rise, your shares should, theoretically, appreciate. However, remember that an investment in these companies also exposes you to their operational efficiency and stability. Any setbacks like operational issues or mine closures can significantly affect their share prices, regardless of the current gold price. Thus, this method may not provide a direct correlation with the gold market.
Opting for gold exchange traded funds (ETFs)
Our recommended approach is the third strategy: investing in gold exchange traded funds, commonly known as ETFs. ETFs track the price of gold through ownership of physical gold stored securely in vaults. As an ETF investor, you’re essentially buying a piece of that gold. This method allows you to reap the benefits of gold ownership without the storage and security hassles. ETFs also offer simplified buying and selling processes and the low management fees include insurance and storage costs, providing you with peace of mind.
ETFs also offer greater liquidity and ease when buying and selling compared to physical gold. They are traded on the ASX and can be bought and sold like a normal stock.
Looking to invest in gold as part of your investment portfolio? All Stockspot portfolios have an allocation to gold. Learn more about how we can help you to diversify and grow your wealth.