Investing in gold has long been a popular way to generate profits. The metal has attracted investors for centuries and today, more than half of all gold consumption is for jewelry. 32% of this demand is for gold bullion. In 2004, if you invested in gold bullion, you would have received a pretax annualized return of over 12%.
If you want exposure to gold but do not have the time to purchase gold, you can invest in an exchange-traded fund or mutual fund. These funds are actively managed and aim to beat the average market price. However, there are several risks associated with investing in gold through mutual funds. First of all, you may be paying for management fees and expenses. These fees can eat into your principal every year.
In addition to buying physical gold, you can also invest in exchange-traded funds (ETFs). However, you should be aware of the fast pace and margin requirements of the futures market. Some popular exchange-traded funds include the SPDR Gold Shares (GLD), iShares Gold Trust (IAU), and Aberdeen Standard Physical Gold Shares ETF.
Another popular way to invest in gold is to invest in shares of gold mining companies. Companies such as Barrick Gold Corp. are publicly traded and have global operations. Other companies, such as Franco-Nevada Corp., aren’t mining gold themselves, but purchase the rights to mine gold on behalf of royalty companies. The shares of gold mining companies tend to go up and down based on their profitability. However, this type of investment is not right for everyone, as it involves considerable research and risks.
Investing in gold through futures contracts and options is another option. Gold futures contracts provide the investor with immense leverage. By buying a futures contract, you can purchase a large amount of gold for a small amount. In addition, gold futures are a great way to speculate on the future gold price. While gold may be volatile in the short run, it has a long-term record of holding its value.
Investing in gold is an excellent way to diversify your portfolio. While stocks and real estate provide good returns, they come with risks. However, physical gold is safe to use as savings and ornaments. Furthermore, it won’t depreciate like real estate or stock market rates do. That means you can diversify your risk and maximize your profits.
In times of crisis, investors often turn to gold as a safe haven. During this time, international conflicts can throw the markets for a loop. In these instances, investors look for a safe asset that can still make them money. With a long-term track record of gains, gold can be an excellent addition to your investment portfolio.
In addition to gold, you can also purchase gold mining stocks. Although these stocks may be volatile, they provide exposure to the biggest gold miners in the market. Furthermore, gold mining ETFs offer diversification across different sectors of the sector.