Can we take a moment to appreciate the fact that gold has preserved its power for centuries?
That’s right! Gold has long been viewed as a safe haven investment and a reliable way to preserve wealth for a very long time, folks. So, when things get somewhat shifty with the economy and the stock market, most people have questions like “Should I invest in gold?” or “Is it a good investment for me?”.
But hold your horses, because you need to consider whether or not gold is a good fit for your portfolio in light of your long-term objectives and investment approach. Gold is well-known as a portfolio diversifier, but it also attracts investors because it is seen as a solid hedge against inflation.
It’s wise to familiarize yourself with gold’s inner workings before purchasing. The danger of loss is inherent in any investment, and it increases if you don’t have all the information available to you. You can check out this link for more https://www.kiplinger.com/slideshow/investing/t026-s001-investing-in-gold-10-facts-you-need-to-know/index.html.
You’re in luck because we’ll go over some of the most important things you need to know before investing in gold, or another precious metal:
Table of Contents
Physical, Paper or Digital?
One reason to put money into precious metals is so that you can have something of value that will never become someone else’s problem. This is pretty much accomplished through investments in physical precious metals (coins and bars), digital gold, and exchange-traded offerings backed by physical precious metals. Gold Proof Coins, in particular, are esteemed for their tangible value and historical significance, making them a favored choice among investors seeking stability.
Gold certificates and futures contracts are two examples of paper gold that aren’t backed by actual gold and don’t give investors legal rights to the metal or the opportunity to trade it in for bullion. Investors in paper gold are likely to become unsecured creditors in the event of issuer default.
If you want to invest in precious metals, you should only do so in the form of physical precious metals. If you’re big on control, having a physical possession of your wealth can make all the difference in the world for you.
Stay Clear of Pushy Salespeople
When you invest in precious metals in their physical form, you run the danger of being subjected to high-pressure sales methods and perhaps being a victim of fraud. Keep in mind that no respectable investing expert should ever pressure you into making a choice about your investments right away or tell you to “act now.”
This kind of coercion is unacceptable even if the company is not trying to scam you. It’s common practice to employ various methods of persuasion, such as holding out the possibility of enormous gains or the “phantom riches” approach or hinting that there’s a limit on the supply of precious metals or the “scarcity” approach.
It can be quite easy to spot these tactics, but only if you’re already aware of them beforehand! A good idea is to do enough research on different companies like USAGold to find out if they make the most sense for your investment!
There’s No Such Thing as a Low-Risk Investment
Whoever is convincing you that there’s absolutely no risk involved with investing in precious metals is pretty much lying to your face. This type of investment has awesome perks connected to it, but we should never forget about the risk tied to it as well.
The somewhat less pretty side of investing in physical precious metals includes the need to pay for storage, the possibility of price changes, and the possibility of using investor loans to fund the purchase of metal bars, bullion, or coins. Yikes!
So, our advice to you is before sending any money, make sure you have a risk disclosure statement, as well as the salesperson’s and company’s contact information. If the salesperson declines, don’t waste a second moving on to the next precious metals company. For additional info check out this page.
And Then There’s the Leverage Risk
Leverage, or borrowed money, can be a risky and expensive way to invest in precious metals. Gold investments sometimes include making a down payment in cash and financing the rest of the purchase “on margin.” This marginalized amount may account for as much as 80% of the metal’s purchasing price in some situations.
A margin call could occur if the value of the investment drops below the loan’s required minimum, as this is an interest-bearing loan. To avoid having your investment liquidated without your knowledge or permission, you may be subject to a margin call and asked to make an additional investment.
You Might Have to Pay Premium
The interesting thing about gold is that when you decide to buy it, you’re not only spending money on the price stated. Sometimes you have to pay a premium or a markup. What do we mean by that, though?
Well, the added cost, which may result from production, shipping, or anything else, is factored into the final price. More labor-intensive gold usually has a higher price tag. As a result, your profits may be diminished until you recover the premium you initially paid.
Be sure you fully comprehend the premium, storage fees, and greater capital gains rate associated with gold before deciding if it is a good investment for you. All of these considerations are relevant when deciding how much gold to invest in.
Obviously, this shouldn’t discourage you from investing in gold, but it’s low-key worth noting the potential drawbacks.
The Difference Between Gold Bullion and Coins
When purchasing gold, you’ll likely have two options: bullion and coins. The gold and purity of certified coins are important considerations, but you should also think about how rare they are. Certified coins are those whose authenticity has been confirmed by a third party.
Similar to collector’s artifacts, their worth is determined by how uncommon they are. So, even if the spot price of gold drops, the value of your certified gold coins may stay the same or even rise. Learn the differences between bullion and coins and think about your long-term goals before making any purchases.