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How to Start Investing in Gold: 5 Tips for Beginners

14 November 2012 One Comment

Investing Gold

With the volatility of the stock market over the last few years, gold has become an increasingly popular “safety” investment choice, due to its historically stable returns over time and use as a hedge against currency devaluation.

Despite being relatively easy to invest into, beginner investors are frequently overwhelmed by the seemingly endless investment options for gold. If you’ve been thinking about investing in gold but aren’t sure exactly where to start, the good news is that gold is one of the easiest investments to make successfully. However, it’s important to use the right strategy and the right timing – like any investment.

#1 – Stick With the Real Deal.

Most experts agree that it is best to start your gold investing with either gold coins or gold bullion, or a mixture of each. Physical gold is simpler to understand, easier to acquire and less risky than what is known as Exchange Traded Funds (ETFs) which are securities that are designed to track the price of gold. ETFs have been around since 2003 and began right here in Australia. While they can be an exciting and potentially rewarding way to invest in gold, they are much more complex and are not recommended for the beginner.

#2 – Stay Away from Gold Futures

The gold futures market is like other commodity futures where you agree to buy or sell gold at a specific price on a specific date in the future. While it is one of the biggest markets in the world, it is also quite complex and risky. It is tempting for many investors because you are trading on margin which means that even small movements in the price of gold can translate into a large financial gain. Some people may attempt to lure you in to investing in Gold Futures, but just like ETFs, this is not a place for beginners.

#3 – Buy Low but Don’t Wait for the Bottom

This common mistake is made by many investors, even experienced ones. Of course you don’t want to buy if prices are especially high as the result of a sudden surge in interest in gold. This can occur when stock markets suddenly fall, such as they did in 2008. Timing isn’t quite as critical as that for stocks or real estate, so buy it when you need it.

#4 – Use Gold to Balance Your Portfolio

Investing in gold should be thought of as a way to diversify your overall investment portfolio. Many experts recommend that for the average investor, gold should make up between 10 to 30 percent of their portfolio. Where you fall in that range will depend upon many variables that are unique to you.

#5 – Get Expert Advice

Be sure to stay away from amateurs and be very particular about whose advice you follow. If you want to shorten your learning curve and stay on safe ground then seek the advice of a professional. Finding a reputable and long-standing gold firm with whom you can work is an essential ingredient. A professional gold broker will steer you in the right direction and help you avoid making costly mistakes. They will help you determine the best product mix for your investment needs and make sure that you are paying fair market prices.

So in a nutshell, the best way to start investing in gold is to actually get started, keep it simple and find a reputable company to buy and sell your gold with. Stay informed on market trends, consider each investment decision carefully, and you’ll find why so many investors have chosen to invest in gold in recent years.


Author Bio:

Jacob Harrison is a precious metals investment specialist from Australian Bullion Company, Australia’s oldest privately-run precious metals wholesaler and retailer.

One Comment »

  • Aram Durphy said:

    I'm not sure I would recommend starting a position in gold now.

    Deutsche Bank recently published its annual Long-Term Asset Return Study. From 1971 to 2012 we find these returns:

    10 Year Treasury – 3.77%
    Equities – 5.44%
    Gold – 4.90%

    But, the past 5 year return for gold has been 12.35%. This looks like we might expect a reversion to the mean in gold prices as the world economy picks up.