There are many reasons why a lot of people want to invest in this precious shiny metal. Frankly, the appeal of gold both to investors and regular people didn’t start recently, it’s been on since ancient times. Long before now, gold symbolized wealth and high social status and today, not much has changed in that regard.
Today, however, investors seem to be taking a liking to the metal because of its price stability compared to other investment options like stocks and bonds. Although every investment comes with its own set of risks, some are much safer than others and gold investment is considered one of such safe ones. Visit https://www.getsmarteraboutmoney.ca/invest/investing-basics/understanding-risk/types-of-investment-risk/ to learn more about the types of investment risks.
Financial history shows how the metal has withstood harsh economic situations that stocks, and other investment options couldn’t. An interested investor may be wondering how this is so. Well, gold is often unaffected by economic and financial crises because, at such times, many people buy the metal.
They do so because gold has an inherent value that is recognized around the world. At times of economic turmoil, people preserve their wealth by buying gold. So, if the financial market crashes as it did in 2008, their wealth will be intact. One other notable reason why people invest in the metal is that it can be used as a hedge against inflation.
How to Invest in Gold
There are many ways in which investors invest in this asset. A few of them include:
Buying Bullion
Many investors consider buying physical gold the safest form of investing in the metal. Unlike other gold investment options, this brings a level of assurance that others don’t, and here’s why. When you buy the asset physically, unlike gold stocks and ETFs, its value is hardly affected by the ups and downs of the financial market or the economy.
People that buy the asset physically, don’t have to worry about losing their asset if a company goes under as is the case with stocks. While there are certain cons that come with this option like liquidity issues, it is generally considered to be the safest form of gold investment.
When it comes to buying bullions, investors are often advised to buy gold coins and not bars as coins are a lot easier to liquidate and move around for storage. Speaking of storage, investors should consider taking advantage of gold individual retirement accounts (IRA) as they have several tax benefits.
Buying Stocks from Gold-Mining Companies
Bullion investment doesn’t provide as much capital gains as stocks. In fact, most people that buy bullion don’t necessarily do so in hopes of turning in a huge profit. But as we established earlier, they do so in a bid to protect the wealth they already have; the profit that comes is only a minor benefit.
But stocks have much more capital appreciation potential than bullions because their value increases as the issuing company make a profit and excel in business. Some stocks even pay monthly, quarterly, or annual dividends which is another benefit that investors who enjoy liquidity can enjoy. That said, this investment option is riskier as the value of the asset is tied to how well the issuing company does.
Finding Reliable Gold Companies
Investing in this metal can be expensive which is why investors must double-check every company they are considering doing business with. Gold scams have become quite popular as more and more novice investors enter the space.
These fraudulent companies may be as many as the legitimate ones, if not more. So how do you tell them apart to avoid losing your investment? While you will find some information on this page, we will quickly look at some tips that can help you.
Reputation
It is impossible for fraudulent companies to be recognized in the industry. In this industry, as with others, reputation is built by how satisfied customers are with services. The more satisfied they are with the transactions they have, the more likely they are to talk about the company and recommend it to friends and family that are interested.
You can also tell if a company is legit by checking if they belong to industry-recognized associations and groups. Scam companies don’t belong to such associations because to be a part, they must be vetted.
Years of Operation
This one might be a little tricky as there are relatively new companies that are legit and may have yet to even build a decent reputation in the industry. That said, your safest bet would be working with companies that have been operational for at least five years. Why?
Because it’s almost impossible for scam companies to last that long without being exposed by dissatisfied customers. However, it still is a possibility. If you ever come across a company that’s been operational for that long and they are yet to be known in the industry, chances are that it might be fraudulent.
Pricing
Most scam companies offer their services and products at prices that are often well under market prices. This is done in a bid to lure people in as most people are drawn to cheap prices. Prices that are well under the market price should always be seen as a red flag because no legitimate company would sell assets below industry prices.
Deals that appear too good to be true are often never true and new investors should always run from such offers. While it is financially prudent to compare prices and offers, it should be done with caution to avoid getting ripped off. Some companies specialize in providing software that helps in managing precious metals pricing.
Final Thoughts
Investors should also bear in mind that not all legit companies offer excellent services. As you research companies for their legitimacy, also pay attention to what their customers are saying. Check review sites like Yelp and Better Business Bureau to know what is being said about the company.
You want to make sure you work with the best because their services may also include consultation and investment advice. Since novice investors don’t know much about this investment option, it can be quite helpful to have experts advise you on how best to go about the whole process.
