Gold has been considered extraordinarily valuable since before the beginning of recorded history. We are all aware of its beauty, yet its significance goes far beyond its ability to capture the eye. Indeed, it has become a symbol of the finest of all human physical achievements, ranging from the Olympic Games to the Academy Awards.
The allure of gold is so powerful that we refer to a civilization’s apex as its “golden age.” Yet, it is during the worst times that gold’s value becomes even greater, due its ability to weather macroeconomic, geopolitical and monetary crises. Thus, it is generally accepted that a diversified portfolio should include a minimum allocation of 10 percent to gold-related investments.
If you’d prefer not to own gold physically, there are a variety of options at your disposal. Let’s examine a few of the most popular methods.
Gold ETF Funds
If you’re interested in circumventing the logistics of storing, moving and insuring physical gold, a Gold Exchange Traded Fund (ETF) is a good place to start. An ETF is traded on major stock exchanges such as the NYSE and NASDAQ, though AMEX is the trading venue most often used for Gold ETFs. Essentially, a Gold ETF will purchase a significant amount of gold and issue shares. Thus, if the price of gold were to increase by 15 percent, your individual shares would increase by the same amount. If you haven’t invested in gold before, this a good way to test the waters, as most gold ETFs allow you to buy in portions of an ounce. This is particularly appealing in today’s economic climate, as many of us simply can’t afford the price of a full ounce of gold.
Gold Mining Companies
Another popular route is to purchase gold shares in mining companies. Since the price of gold is on the rise, many look at gold mining companies as a sound investment, as the profits of many companies can be expected to rise as as a result of gold’s surge. That being said, this can be riskier than an ETF — since mining companies are subject to a variety of economic conditions — so you’ll certainly want to research any company that’s piqued your interest prior to investing. Mining companies come in three different sizes: Large (over a million ounces per year), medium (200,000 – 1 million ounces per year) and junior (less than 200,000 ounces per year). As might be expected, juniors are the most volatile and therefore carry the highest risk/reward ratio, while the larger companies tend to offer slow, steady growth.
Gold Mutual Funds
Purchasing a gold mutual fund allows you the opportunity to diversify with minimal risk. Your money is pooled with that of other investors, and invested in a portfolio containing a variety of gold bonds, securities and stocks. This is often regarded as a safe, conservative means of gold investment, as the risk is spread out. Mutual funds also come with the added benefit of being managed by financial professionals, allowing those of us who are unsure of our own investment expertise an appealing alternative.
It’s important to choose the path that’s the right fit for you as an individual investor, so take the time to research your options. Whichever route you choose, it’s comforting to know that an investment in gold has been proven to be a practical decision throughout thousands of years of human history.