What is the Best Way to Own Gold in 2021?
With ever increasing talks of inflation, market correction, and near apocalyptic predictions from various financial sources out there in today’s media, it seems there is a renewed interest in the gold market. If you are interested in learning the best ways to invest in gold in 2021, read this article to find out!
I entered the investment world as an advisor in the year 2009. While not a great time to be in the financial sector, I found out quickly that investors were exiting the stock market and running for gold in droves, which taught me a lot about the gold investment industry in general. I found that people ultimately valued wealth preservation over growth whether they wanted to admit it or not. It’s human nature to want to protect what we have to ensure that our family and beyond are taken care of. If you believe that a gold position can help you preserve more of your wealth (we do), then let’s take a look at the best ways to invest in gold.
Investing in Physical Gold
The most basic way to own and invest in gold is to simply buy some. Whether you purchase online or at a local coin exchange, you can purchase physical gold in the form of gold coins or even gold bars relatively easily. You can also invest in antique gold coins which typically have a value greater than an equivalent weighted modern coin. The caveat I would mention is that unless you have an understanding of the collectible coin market, it is best to avoid buying collectible gold coins and focus on modern gold coins that can be priced based on their weight and the current spot price of gold.
The benefit of owning physical gold coins or bars is simple, you own physical gold that you can hold in your hand. If there is ever a need to access your gold quickly, it will be within reach whether you choose to store your gold in a safe at home, in a bank deposit box, or at an off site private storage facility, you should be able to access your gold quickly and easily.
The main downside of owning physical gold is tied to the fact that it is a physical asset and that you do need to store it in some way, shape, or form. Whether you choose to store at home, bank, or storage facility there will always be associated costs. Those investors with larger positions will want to consider diversifying their storage as well to minimize risk of loss due to theft or other unforeseen circumstances.
The other downside cited bny many is the lack of liquidity if you have a need to sell in a hurry. The internet has certainly connected more people than ever before and made finding buyers (of anything) easier, but physical gold does take longer to sell and costs more to ship than our other two options.
Investing in Gold Indexes
A gold index fund is tied directly to a gold index or in most cases the spot price of gold which reflects the price that gold is trading at around the world. Just like any other financial product, it can be traded on nearly any brokerage platform.
The benefit of owning an investment fund that tracks with a gold index is that it is easy to buy and sell quickly on domestic or worldwide exchanges. Rather than attempting to list the gold you want to sell and finding a buyer you can simply trade the shares of the fund at the current trading price on the open market.
The downside of owning a gold index fund is that you have no rights to any physical gold, you own what many experts refer to as “paper gold”. Some would say that physical gold prices trade higher than “paper gold” due to the lack of substance and surety that owning physical gold brings to investors.
Investing in Physical Backed Gold Funds
A physical gold backed fund is essentially the best of both worlds when it comes to owning gold. These types of funds are traded like traditional mutual funds or exchange traded funds on the open market but they are backed by physical gold stored in a vault that the owners of the fund have rights to. In fact, the best physical gold backed funds will provide a shipping time frame that you can expect your gold to arrive at your home should you choose to make the request.
The benefits of owning a physical gold backed fund include the two benefits mentioned above as it pertains to physical gold and gold funds. A physical backed fund allows you to quickly and easily buy and sell positions and it also gives you access to physical gold should you need it.
The downside to owning a physical gold backed fund is that you don’t have the gold within arms reach and to some people that is very important. If a person is ok having access to their gold within a few days then it becomes less of an issue.
So, What is the Best Way to Own Gold?
The short answer is, it depends. It depends on your financial situation, your risk tolerance, your desire to either have or not have physical gold close by, and ultimately it depends on your investment goals. I will say that I would shy away from Non-Physical Gold backed funds, or “paper gold” and stick to either physical gold or physical gold backed funds for the benefits mentioned above. It’s also not a bad idea to do both, owning a percentage of your gold position in a fund and owning a percentage of your gold physically can help minimize storage costs but also give you peace of mind that holding physical gold can bring.
If you are interested in diversifying your portfolio with Gold or adding to your current Gold position, sign up for a FREE Consultation!