Tags: Money | gold | investing

How Does Investing in Gold Work?

By    |   Thursday, 02 July 2015 12:02 AM

For those interested in gold as investment strategy, there are several pathways used to diversify a portfolio, and they come with different risks.

Among those ways to invest are in exchange-traded funds (ETFs), closed-end funds, single stocks and gold coins. Gold jewelry remains the most popular way for consumers around the world to hold gold, according to the World Gold Council.

There are more than 30 ETFs related to gold, CNBC said, up from just 16 gold funds in 2010. Experts say investing in gold is used primarily as a substitute for currency.

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A closed-end fund is created as a fixed amount of capital is raised through an initial public offering, according to Investopedia.

Such a gold strategy offers investors a bargain and discount, and can be the right way to go for those who can't physically own the precious metal and store it in a warehouse, Forbes said.

Buying single gold stocks via investing in a mining company itself is riskier and requires a smart strategy to pick them, CNBC said, noting that investors should look for companies that are well-managed and have a production-focused inventory.

While gold-coin purchasing is widely advertised, it is a riskier strategy for gold investing. Nonetheless, the U.S. Mint has sold more than 500,000 gold American Eagle coins, according to CNBC.

Ownership of gold jewelry marks at least half of the world's demand for gold, CNBC said, cautioning the liquidity of gold jewelry itself, which could create a loss for someone looking to sell their jewelry in a down market.

Experts note that gold investing is often volatile and risky. Writing for Vanguard, senior analyst Christopher Phillips urged caution.

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"Whether gold has a place in your portfolio ultimately depends on your tolerance for risk, your time frame, and your goals. Just be aware that a specialized, concentrated asset like gold comes with risks that are unique," Phillips wrote in a commentary published on the company's website.

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For those interested in gold as investment strategy, there are several pathways used to diversify a portfolio, and they come with different risks.
gold, investing
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2015-02-02
Thursday, 02 July 2015 12:02 AM
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