Safe-haven assets can vary depending on the specific down market. Safe-haven investments like learning how to invest in gold for beginners may help you stay profitable even when a specific market is down. Therefore, for an asset to serve as a safe-haven, you must perform significant due diligence.
Gold is widely considered as the ideal safe-haven investment. Is gold new to you? In this article you can find the key information about how to invest in gold for beginners. Gold can prove to be a valuable way to diversify your investments. It is relatively rare, and its price movement doesn't often sync with other assets like property or equities. Every investor should consider the insurance gold offers our portfolios and probably allocate between 5% and 15% of their entire portfolio to gold investments and gold-related investments.
As highlighted above, gold is often among the most-sought after safe-haven investments considered by investors worldwide (others include treasury bills, defensive stocks, etc.). With the present economic climate, there isn't any surprise that the prices of gold per ounce on the trading markets have reached record highs. Given that gold prices have risen about 30% in 2020 and no end to this economic uncertainty within sight, you might be wondering whether now's the ideal time to start investing in gold. Here are a few factors to consider.
Investing in Gold – Advantages
There are some feasible benefits when you consider diversifying your portfolio, particularly buying gold. Here's an overview of what every investor should expect:
·Stability
Gold is often considered to be recession-proof. According to historical data and charts, there’s an increase in gold demands during periods of uncertainty, which can take different forms. It may be economic (financial recession), due to currency weakness, or maybe stemming due to political instability within specific regions.
Gold prices have ultimately grown steadily over the years, especially during periods of economic challenges. This is evident in 2020 as gold price has reached record highs beyond $2,000.
·Diversified Portfolio
A balanced portfolio is one of the cornerstones of a successful investment. This is where buying gold or knowing how to invest in gold, particularly for beginners, come in useful. A gold investment within your portfolio offers some secure balance, and often hedges against market volatility and economic uncertainty because of the safe-haven character of this commodity, and the fact that its value isn't significantly affected by the same demand and supply reactions as the majority of other assets.
Gold provides your portfolio with a measure of consistency; however, it isn't the most high-profile performer regarding returns. When considering the increase rates over longer periods, it's often outperformed by most of the major stock indexes and a few other assets. However, it still averages a consistent growth rate, particularly in shorter periods, when there are larger economic challenges. So, the question now is: how should you start investing in gold?
Knowing how to invest in gold for beginners, just like any new asset or market can seem daunting to a certain degree. However, this feeling fades as you begin to realise that there aren't any real barriers to entry. You can kick-start your gold investment in multiple ways. While among them is physically buying gold, there are other numerous, more flexible ways that you can start investing in gold.
Physical Gold
There are numerous ways to purchase physical gold. The most common way to own physical gold is by purchasing gold bullions which are certified as near pure gold and usually purchased in the stereotypical forms of gold bars and gold coins. Gold bars and coins are available from several certified and trustworthy sources across the globe, including specified banks. However, investors should be aware of extra costs, like insurance and storage.
Gold Stocks
Investing in gold stocks is a good opportunity to start investing in gold if you’re interested in owning the asset. You’ll not directly own the physical gold, but you’ll directly profit from a rise in companies (e.g. mining companies) which are directly influenced by the prices of this commodity.
Investing in stocks of mining company also means that you'll have a significant degree of liquidity since the buying and selling of your holdings can be relatively easy which is among the significant challenges if you're purchasing physical gold. However, they're quite susceptible to stock market swings. When there's a bullish rally, they'll perform very well, but they'll also be susceptible to pullbacks.
Gold ETFs
Similar to gold stocks investments, you could select gold ETFs or mutual funds. Exchange-traded funds (ETFs) are vehicles that allow you to monitor the underlying price of gold without the hassle of physically holding the asset. If you seek to play the gold price, ETFs are the most popular options for such investment.
Gold ETFs are a more balanced and conservative way of investment which retains lots of liquidity for traders, though there could be additional fees and certain other conditions attached. This is a more suitable investment as you grow more proficient with trading gold. Popular gold ETFs across the world include the New York Stock Exchange’s Streettracks Gold Shares (NYSE: GLD) and the London Stock Exchange's ETF Securities' Gold Bullion Securities (LSE: GBS).
Gold Futures & Options
The gold futures market is another viable alternative when it comes to trying to know how to invest in gold for beginners. Futures are contracts to purchase an asset (gold) in future within a specified point for a specified price. They are extremely popular trading markets and have very high liquidity potentials.
This extreme liquidity can be positive when you want to trade your asset quickly. However, you should be aware that the futures & option market can be significantly volatile, and futures & options trading comes with considerable risk levels.
Paper Gold
Paper gold investment is investing in gold mining companies or companies that are exploring for new gold deposits. Some companies are both explorers and miners. If you want to invest in gold mining companies, it’s an excellent idea to diversify your investment across multiple companies.
Investing in a gold mining company carries more risks than investing in gold itself. The operating risks of miners can break a correlation to the actual gold price. Gold miners run the risk of defaults, and their share can trade lower in case of any operating problem with the companies regardless of the current gold price.
Final Thoughts
A healthy investment strategy can be summed up in a single word – Diversification. You should consider making gold an element within your portfolio; however, do not go overboard. Similar to every other financial instrument, there are advantages and disadvantages of investing in gold.
If you believe that gold could be a safer bet to hedge against inflation, investing in physical gold – bars, bullions, coins, and even jewellery are paths that you can take towards achieving gold-based prosperity. If you're opposed to holding physical gold, buying gold stocks and gold ETFs of companies directly influenced by gold prices or paper gold of gold mining companies may be a safer bet – of course, each bears varying degrees of risk.
Finally, if you’re interested in using leverage to profit from rises in gold prices, the gold futures and options market might be your answer. It is worthy to note that there’s a significant level of risk associated with all leverage-based holdings.
Trading Gold CFDs with Investlite
The most common gold CFD to trade on is the XAUUSD. This is gold priced against the US dollars. Other related markets include the XAUAUD, which is gold priced against the Australian dollar.
With Investlite, users can speculate the price movements of gold and trade with a broker that offers the highest possible regulation, security, and safety. You also get to:
Trade and invest with a broker that is internationally regulated.
Open multiple account types such as a CFD trading account to go short or long and potentially profit from market movements (up and down) as well as access to leverage.
Access the most secure and fastest platform across the globe – get an MT4 for web, Mac, Windows, Android and iOS operating system so that you can trade on the go.
Trade on multiple classes of assets, including gold, commodities, indices, currencies, cryptocurrencies, etc.
Investing in gold can prove to be a smart move. Most investors like to own some gold because it helps to diversify their portfolios – experts usually recommend between 5% and 15%. If other markets are falling, gold tends to rise, which gives investors some cushion to balance out their losses.
Is trading gold suitable for beginners?
Anybody can trade gold, including newbies to this commodity market. With the wealth of resources and products available online today, gold trading has become increasingly popular with beginner traders.
How to invest money in gold online?
There are many ways to benefit from price movements in gold. One of the common ways is by using a Contract for Difference (CFD). CFDs allow investors to speculate an asset’s (gold) and potential profit from the upward and downward movements of the market. By using CFDs to trade gold, the trade never possesses the physical gold meaning there are no storage or security challenges.
Where can I trade gold?
There are several ways to trade gold. You can invest in gold futures contract. Futures contracts are agreements to buy and sell a commodity (gold) at a future date. Purchasing a gold futures contract means you don’t physically own the gold. Another option is through a gold ETF or gold stock on a stock exchange. With a stock trading account, investors can trade the gold price movements.
Is gold a good long term investment?
Gold has consistently been considered a durable value store and a hedge against inflation. In the long term, both other commodities like bonds and stocks have outperformed gold on average in terms of price increases. Nevertheless, over specific shorter periods, gold may come out ahead.
Trading Forex and CFD's carries a high level of risk to your capital.
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