If the year 2020 has taught us anything, it’s that we always have to be prepared for the unexpected. That means planning ahead, especially when it comes to our finances. For instance, you should have an emergency fund tucked away for a rainy day (or in this case, a rainy year).
Making wise financial decisions also includes having multiple income streams and diversified investments. That may have you asking, “Can I own gold?” The short answer to that question is yes. But the more involved answer is that there are multiple ways to do it. We’ll discuss some of the main ways to buy and own gold so you can decide which option suits you best.
Bullion and Coins
The first option is to physically own gold, which typically comes in the form of bullion or coins. Owning physical gold is an attractive option for those who want to avoid the stock market’s volatile nature. If you decide to own physical gold, then you’ll need to decide where you’ll store it and purchase insurance to protect your investment.
Bars and coins each have their advantages. Gold bars provide more consistency of value because their weight and purity are inscribed on the bar, making it easy to track their worth based on the live gold spot price.
On the other hand, in addition to having their weight in gold, so to speak, coins can also carry additional value for their historical or cultural significance. Typically, the longer you hold on to a coin, the more it’s worth. For instance, a coin collector may be willing to pay more for a rare coin that rounds out a specific collection.
Whether you decide to buy gold bullion or gold coins may depend on how long you plan to hold on to the investment and whether you want to become versed in the particular nuances of coin collection. If you plan to keep the gold only for the short-term or you want a more objective sense of its worth, gold bullion may be the better option. However, if you have an interest in the cultural and historical significance of coins or plan to hold on to them or pass them down to future generations, then it may make more sense to opt for those instead.
IRAs
Perhaps you prefer not to own physical gold but would still like to invest in it as a physical commodity. In that case, you may want to look into investing in gold as part of your IRA (individual retirement account). It’s important to note, however, that if you wish to own physical gold as part of your IRA, you’ll need a gold IRA since many regular IRAs don’t allow you to buy assets such as precious metals.
If your IRA doesn’t allow you the option to purchase gold, you can open a self-directed IRA instead. In addition to gold, these types of IRAs allow you to invest in alternative assets, such as cryptocurrency and real estate. However, you will need a custodian or trustee to manage this type of account. If you need some help finding the right custodian, check out this list provided by the IRS.
Mining Stocks
If you don’t wish to open a self-directed IRA account, there are still a couple of ways for you to invest in gold. For instance, you can invest in the stock of a company that mines for gold instead. Investing in these types of stocks means you’re not simply investing in the value of gold. You’re also investing in the future viability of that particular company. Since the gold mining sector has hundreds of publicly traded companies, it’s important to do your research before you decide to purchase a specific stock.
Stocks in mining companies generally rise and fall with the price of gold. However, one benefit is that some successful gold mining companies can perform well even when the price of gold is down. That’s because well-managed companies will look for ways to cut costs or reduce overhead in order to continue turning a profit.
Because of these variables, those who invest in gold stocks generally see a higher return on investment than owners of physical gold. Even so, the stock market can sometimes be volatile, which is why many people prefer to invest in ETFs or physical gold instead.
ETFs
An ETF is an exchange-traded fund. Instead of owning an individual mining stock, gold C provide the opportunity to invest in an entire collection of gold-backed assets. Some view this option as a more secure investment because it’s not dependent on the performance of a single stock. Just as with stocks, however, ETFs may not line up with the market price of gold since there are a number of other factors that impact the way they perform.
Futures
Just as some see ETFs as a safer investment than owning individual stock, futures are considered a riskier type of investment. Futures are a form of speculative investing, meaning you agree to buy or sell an asset at a future date for a set price, regardless of market conditions. In order to do this successfully, you have to have a strong knowledge of both the asset and the market. Since futures are a very nuanced type of investment, they are generally not recommended for novices.
As you can see, if you’re wondering, “How can I own gold?” there are a number of ways to do so. You simply have to figure out which is the best option for you. Whether you want to purchase gold bars or open an IRA account, Swiss America can help.
We work with clients all over the world, helping them better understand how owning precious metals can offset the liabilities of other assets. If you’re interested in learning more, give us a call. We can put you on the path toward a winning Swiss diversification strategy.