Many people know that I am a bit of a “Gold Bug” and put a portion of my portfolio in precious metals. Because of its worth and lengthy history, gold has been ingrained in all major cultures for thousands of years. Since its discovery, people have maintained a strong interest in it for several reasons.
The recent breakout in Gold price has many investors wondering if they should invest in gold. Gold’s value has increased due to the development of economies and societies, and more people are now investing in it. It has become a trend in finance mainly because gold never loses its value over time and is regarded as a hedge against inflation.
Choosing to invest in gold should be simple. However, you first need to conduct some research on your own. If you need help determining where to begin, you should consult a professional to ask questions such as how you can invest or how much gold can you have.
Alternatively, you can continue reading this article to find out what questions you should ask before investing in gold.
Table of Contents
5 Important Questions To Ask Before Investing In Gold
Are There Any Risks To Investing In Gold?
As with any investment, certain risks are involved when investing in gold. Although gold will not depreciate in comparison to a currency, there’s still a market risk you need to consider. Market risk implies that holding gold will result in a decline in its price.
A perfect illustration would be the price of gold, which peaked in 2020 at USD$2,000 per ounce but averaged USD$1,800 per ounce by the third quarter of 2021.
You should be aware of these risks even though they become less probable over time as market volatility is reduced.
Gold investments in stocks and funds risk not being impacted by measurable factors like earnings. Supply and demand factors affect the price, making it speculative. Unlike stocks that provide dividends, a return on investment is only realized when the investment is sold.
For physical gold investments, you risk having them stolen from your home if you decide to keep them. Storing your investment in a safe and secure location is always smart.
Is It Good To Invest In Gold?
Consider gold investment a haven for your money if you’re concerned about inflation and other calamities. Over the long term, gold has held its value remarkably well despite being just as volatile as stocks.
Gold can be a good investment if you have the right goal in mind. Investing in gold is a wise idea if you wish to expand and diversify your investment portfolio.
Moreover, if you want a physical asset with a high resale value, investing in gold makes sense in this case.
How To Invest In Gold?
If you’re still a beginner and want to know how to invest in gold, there are three ways to do it: buy physical gold, gold mining stocks, and gold funds.
Buying Physical Gold
For beginners, investing in physical gold can be a good start. Physical gold generally requires you to interact with dealers outside of traditional brokerages. You’ll also need to pay for storage and obtain insurance for your investment. There are three main ways to invest in physical gold: jewelry, coins, and bullion.
Buying Gold Mining Stocks
Buying stocks from companies that mine, trade, and refine gold is a much simpler process. You can invest in gold mining companies stocks using a brokerage account.
It’s important to remember that the shares of gold companies are not just correlated with gold prices but also with profitability and expenses. As a result, investing in individual gold companies carries similar risks.
Buying Gold Funds
Gold funds are mutual funds that invest directly or indirectly in gold reserves. They’re based on gold exchange-traded funds and are open-ended investments. The return on the best gold fund investments can exceed its actual price, which can be a profitable opportunity.
You can invest in a commodity without buying it physically through gold fund investments.
Is There A Tax On Gold Investments?
Investing in gold involves tax, too. So, before investing in gold, you need to know about tax liabilities.
For U.S. investors, the Internal Revenue Service (IRS) classifies precious metals as collectibles in the same category as art, rare books, and fine wine. Investments in precious metals held for more than a year are subject to a 28% collectibles capital gains tax rate.
Long-term collectibles taxes range from 28% to 32%, depending on the level of gross adjusted income and filing status, while long-term capital gains rates for other investments range from 15% to 20%.
The ordinary income tax rate will always apply for taxpayers holding precious metal investments for less than one year.
Where To Find A Good Gold Dealer?
If you want convenience, you can find trusted gold dealers online. There are tried and tested dealers like Money Metals Exchange, JM Bullion, SD Bullion, APMEX (American Precious Metals Exchange), and more.
Investing in gold through these online gold dealers is a safe way to diversify your portfolio. Purchasing high-quality physical gold has always been challenging. But thanks to online gold dealers, it’s been easy to invest because they deliver your investment to your home or store it in a vault.
Conclusion
When buying gold, you shouldn’t make a rash decision. To make this investment, you must understand its pros and cons and have a clear plan. This way, you can choose the right gold investment for you.
Ask the questions above before buying gold to help you make the right decision and make the most of your investment.
