Investing in gold is a brilliant way to beat inflation. Gold has remained one of the favourite investment options for the investor who is risk averse, wants to beat inflation and does not have financial acumen to analyze different investments. With the evolution of the financial landscape, the ways to invest in gold have also evolved. In this article, we shall discuss 10 brilliant ways to invest in gold to reap the benefits of investing in the classic precious metal.
Here are the 10 brilliant ways to invest in gold
Category I : Physical form
- Gold Bars and Coins: The first and the easiest way of investing in gold is investing through the physical form of gold. Buying physical gold bars or coins offers direct ownership of the metal. Gold is a tangible and inert asset. It does not get erosion or rusting. This protects the asset from any loss of value due to passage of time, but it calls for storage and security costs. Storage cost might be lower, but the security costs vary from the place you are securing your gold. If you are considering buying gold bars, then you must consider reputable dealers who have established credibility in the market.
- Gold Jewellery: Gold jewellery has some intrinsic value due to gold content, then there’s usually a significant markup for design and craftsmanship. Gold jewellery has always been a preferred way of investing in gold as it gives the pleasure of signalling your social status and wealth in your friend circle on one hand, and gives you the sense of security of investment on the other hand. However, gold jewellery calls for making charges and some mixing of metal with other metals that might reduce the purity of gold and thus, the value of investment. Again, as gold jewellery is in physical form, it also invites the storage as well as security costs.
Category II: Paper Gold
- Gold Exchange Traded Funds: Gold Exchange Traded Funds i.e. ETFs are the other form of investing in gold. These track the price of gold and trade on stock exchanges. You can buy and sell units of ETFs any times of the day, which makes ETFs a liquid. Gold ETFs are not physical gold, so there is no worry about the security or storage costs.
- Gold Mutual Funds: Gold mutual funds are another way of investing in paper gold. Gold mutual funds allow an investor to hold part of portfolio based on gold instruments like gold stocks, ETFs and physical gold. They offer diversification as well as professional asset management services. One point to be noted here is that the prices of gold mutual funds are not directly tied to the gold prices as it is in case of gold ETFs.
- Sovereign Gold Bonds: Sovereign gold bonds are the government backed bonds issued in denominations of grams of gold. They offer interest payments and redemption at the prevailing gold price on maturity. They are a secure way to invest in gold with minimal risk.
Category III: Derivatives
- Gold Futures Contracts: Gold futures contracts are the derivative contracts on gold. Gold futures contracts allow investors to take leverage on your purchasing power. They allow you to trade on the price movement of gold without holding the physical gold. Trading on gold futures contracts offers investors a bouquet of benefits like financial leverage, flexibility and financial integrity than trading in commodities itself. Gold futures contracts are traded at commodity exchange of country. Derivatives are considered as complex financial products and are not suitable for all investors. Because gold futures contracts involve leverage, they hold the capacity to magnify the gains as wells as the losses.
- Gold Option contracts: Gold option contracts are the option contracts drawn on the precious metal gold. They offer some flexibility compared to future contracts, but are more complex and involve risks.
Category IV: Digital Gold
- Online Gold Platforms: Investing in gold has become quite easy and handy through online gold platforms. Online gold platforms offer a convenient, easy and accessible way to invest in gold without the hassle of physical storage. It allows investors to invest fractional amounts of gold digitally, and the amount can be fraction of one dollar. These platforms allow to invest in gold securely, redeem the investment either in the form of physical gold or in cash. Additionally, online gold platforms provide you with the liquidity. However, such benefits do call for transaction fees and the platforms may have terms and conditions for the investment like minimum investment amount, holding period etc.
Category V: Alternative Investments
- Gold Mining Stocks: Investing in the companies that are engaged in the business of gold mining is an alternative way to invest in gold. Such companies allow you to take advantage through capital appreciation in their share price. However, their share price is dependent on the company’s performance which is derived through mining and trading of gold. However, these stocks are subject to company specific risks, sectoral risks and overall fundamentals of the economy they have their business.
- Gold backed Cryptocurrencies: Cryptocurrencies are the contemporary form of alternative investments. Gold backed cryptocurrencies are the crypto currencies which are backed by physical gold reserves. Their value is tied to both the gold price and the volatility of the Cryptocurrency market itself.
