Investing in gold has been traditionally popular amongst investors. This is because gold was seen as a global currency, and held its value despite short-term fluctuations. Nowadays, with the advent of cryptocurrencies and the removal of the gold standard, gold is no longer seen as a currency. However, gold remains a popular investment vehicle that can hedge risk against inflation and political unrest.
There are numerous ways to invest in gold such as gold bullion (physical gold), mutual funds, gold futures, and so on.
In this article, we’ll cover the best strategies that experienced investors use when investing in gold.
Invest for the Long Term
The value of gold heavily fluctuates in the short term. This fluctuation can be caused by a large variety of factors such as global affairs, interest rates, currency fluctuations, and so on. Hence, it is much riskier to invest in gold in the short term compared to the long term.
If you’re an investor who is looking to preserve and grow their wealth, then investing in gold for the long-term is the smarter option. The value of gold has been steadily rising over the last few decades at a pace with inflation or sometimes even beating inflation. While this does not guarantee that the value of gold will always keep rising, it does provide an effective data point that makes gold an attractive investment in the long term.
Diversify Your Portfolio
Even though gold is seen as a “safe” investment choice, it would be ill-advised to invest all your money into gold. As mentioned above, the value of gold can fluctuate heavily, and there is no guarantee that it will be in your favor.
Hence, you should invest around 10 – 20% of your total portfolio in gold. This is a rule of thumb and can differ depending on your personal investment goals and strategy. However, you should never invest all your money in a single asset class including gold.
Invest in Securities instead of Physical Gold
As mentioned earlier, there are several ways of investing in gold including bullion, coins, jewelry, mutual funds, gold futures, ETFs, stocks of gold mining companies, and so on. Traditionally, people had no other option except to invest in physical gold such as coins or jewelry.
However, it is difficult to store gold safely and physical gold is much more illiquid than gold securities. This means that if you’ve invested in physical gold, then you’ll need to incur higher costs than if you were invested in gold security.
Comparing Gold With Other Popular Asset Classes
Before investing in gold, you should be aware of what else is out there. Other popular asset classes include stocks of corporations, cryptocurrencies, other commodities such as oil and silver, bonds, and so on.
Those who invest in gold do it because gold offers a great way to beat inflation and maintain the value of your investment. Gold is also less risky than most other asset classes with similar returns.
As mentioned earlier, you should not exclusively invest in gold but also diversify your portfolio with other asset classes to minimize your risk.
These are just some of the investment strategies followed by gold investors around the world. These strategies are meant to help you minimize your risk while investing in gold and maximize your chances to meet your financial goals. Investing in gold can be a great option if you’re looking to grow your wealth over the long term.