Advice on Buying Gold

(This is a guest post from Michael Lombardi from Profit Confidential)

Ask a group of investors about the feasibility of investing in gold and you will get a plethora of ambiguous answers. The iconic investor, Warren Buffet, has made it clear in his several interviews that he sees no logic in investing the hard-earned dollars in gold, whether it is gold bullion or the gold stocks. On the other hand, you have a lot of investors who can recount the fascinating returns gold has offered them over a period of time. While the jury may be out on the subject of investing in gold, a lot of people have shown renewed enthusiasm in having gold as a part of their portfolio. Whether the motive is to make a hefty profit from gold investments or use it as a hedge against inflation, gold has managed to grab limelight in the recent past. This aim of this write-up is to provide the readers some information about investing in gold stocks and bullion.

Should I Invest in Gold Bullion or Gold Stocks?

There are numerous ways to invest in gold, common among them being buying gold in its physical form and investing in gold mining stocks. Whether you should invest in gold bullion or gold mining stocks depends to a large extent on the financial strategy of the individual. Traditionally, gold bullion is viewed as a low-risk investment vis-à-vis buying gold stocks, and as is the case with most investments, low-risk usually translates to a lower return on investment (ROI). So, if you are investing in gold to achieve a higher ROI, investing in gold mining companies can be the option for you. On the other hand, if you want to use gold as a hedge against inflation, you might be better off buying gold bullion.

When Should I Buy Gold?

Gold works as an investment only when it is bought at extremely low levels. Gold is essentially a long-term investment and for it to provide you a decent ROI, you might need to wait for several years. Many experts are of the opinion that gold prices are at low levels currently, and any new investor looking to buy gold should do it now. After reaching high levels of $1,900 per ounce in 2011, gold prices are hovering at around $1,278 per ounce currently. Experts are of the belief that this is good time to enter the gold market on a long-term basis.

Gold Mutual Funds

Investing in gold mutual funds can be another way of having gold in your portfolio. These mutual funds mostly buy stocks of gold companies and are a better way of risk mitigation. Apart from investing in gold mining companies, these mutual funds also buy gold bullion. Gold mutual funds can be a great option for those investors who have no previous experience in investing in gold.

A Long-Term Affair

Gold was in high demand during the economic crisis of 2007-08. A lot of investors realized that gold was a good option against economic and political uncertainties. After losing heavily in the stock market, investors turned to gold to settle the score or to get them out of debt. What these investors forgot was that gold has traditionally been known to provide good ROI when it is held for a considerable amount of time. Viewing it as a day-trading opportunity might work for a minority of investors, but for exceptional returns, one needs to see through the highs and lows of the market. This is one of the essential factors that need to be taken into consideration while investing in gold stocks or gold bullion. As we mentioned before, gold has an intrinsic value, and it is free from any external liabilities unlike the stock market, therefore, being patient and looking at it as a long-term investment can prove to be extremely beneficial for investors.

Receive these articles per e-mail

Subscribe for the free weekly newsletter and receive 3 papers about physical precious metals investing