What Is the Best Strategy for Gold Investment?

Throughout history, investors have turned to gold for stability, especially during times of economic turmoil. Gold is a popular investment for numerous reasons, including the way that it diversifies your portfolio and how it mitigates losses when the market is stressed.

While there is a general consensus that investing in gold is smart, it is not as easy to find agreement on the best strategy. That is because there are so many different ways to invest in gold.

Buying Physical Gold

While this may seem very plain, one of the best investment strategies is to buy physical gold. Doing so gives you the benefit of always having access to the gold no matter what happens to the price. You know that at any time in the future, you will be able to trade it for commodities or currencies. The only difference over time will be what it is worth.

Many people who choose to buy physical gold do so due to its status as the “currency of last resort”. This essentially means that if our current system faces an economic collapse, gold is likely to still be valuable.

When you buy physical gold, the price fluctuates, but your ownership of the gold is final.

Buying Gold Futures

In some ways, buying gold futures is very different from buying physical gold, as you never actually own it. Despite that, you are able to make a profit.

This makes gold futures a popular option for those who don’t want to own physical gold. Maybe you don’t have a secure place to store it. Or perhaps you just don’t want the risk of it being stolen. But what are gold futures?

Gold futures are a way to make a profit off future price fluctuations of gold. With a future, you make a legally binding agreement that the gold will be delivered in the future at the price you agree on. However, you don’t ever have to physically take possession of the gold. A futures exchange standardizes the time, place of delivery, quality, and quantity.

Buying ETFs That Have Gold

Another option is to buy an exchange-traded fund (ETF) that owns gold. This prevents the need to watch the market yourself, as the manager of the ETF does it for you. ETFs typically have the goal of matching gold’s price performance, minus the annual expense ratio of the ETF.

An added benefit of ETFs with gold is that they are easy to exchange for cash. The process is as simple as buying a stock. One example of an ETF with gold is SPDR Gold Shares (GLD).

Buying Mining Stocks or ETFs That Own Them

Another indirect way to invest in gold is to buy a stock from a company that mines gold. A variation of this would be to buy an ETF that contains mining stocks.

This method works for two reasons. Firstly, when the price of gold increases, the mining company’s value should increase as well. Secondly, if the company improves its production, you get another opportunity for the stock’s value to increase.

Buy Gold Via Dollar-Cost Averaging

Whether you choose to buy physical gold or gold futures, a smart strategy is to use dollar-cost averaging. This strategy involves using a fixed amount of money to buy gold at the same time every month. The amount of gold you buy each month would depend on its value at the time.

The idea behind dollar-cost averaging is that you protect yourself against market uncertainty and inflation. To demonstrate, consider if you were to buy a lot of gold only for the price of it to drop the next day. You will likely be disappointed because if you had waited a day, you could get more gold for the same money. Dollar-cost averaging lets you average out these fluctuations, so you don’t have to guess when prices rise or fall.

Getting a Gold IRA

You have likely heard of IRAs, but you may not know that self-directed gold IRAs exist. This is a variation of an IRA that lets you add gold as well as other precious metals. The idea is that you get more control and flexibility.