Gold Bullion Guide
Buying Gold Bullion – Is it a Good Investment for Small Investors?
Many small investors hesitate to even consider gold bullion as a part of their portfolio because they believe that only those with substantial funds can make a worthwhile investment in this metal.
Understanding More About Gold Bullion:
- Types of Gold Bullion (i.e. Gold Bullion Bars vs. Coins)
- Physical Gold Bullion vs. ETFs
- Gold Bullion Storage
Nothing could be further from the truth. In fact, investing a portion of the portfolio in gold can lend some much need stability to the small investor’s finances.
Gold is one investment that has a proven track record of appreciation throughout history. A small investor who is averse to taking unnecessary risks with his finances should definitely diversify his portfolio with investments in gold.
To see the different types of gold bullion available to you, with respect to sizes, quality, cost and weight, you should read this article on types of gold bullion.
Why Gold Bullion?
There are many investment options that are perfectly safe and offer reasonable returns. For example, blue chip bonds, government bonds, etc are all perfectly safe instruments that also offer a fixed, consistent return. But there is still good reason for a small investor to earmark some part of his total investment portfolio for gold bullion. Experts suggest a 5% to 10% exposure to this precious metal. Here are two of the primary reasons why gold makes a good investment choice:
- Liquidity- Fixed income instruments like bonds are safe and give assured returns but they cannot be considered highly liquid. The demand for bonds, and consequently their value, does fluctuate with the economic conditions. But gold is one investment that can be said to have consistent demand. This precious metal performs well in both a subdued economic climate and boom time. Gold is one of the best investment options where liquidity is concerned because no matter how the economy is faring there is always a market for this metal.
- International Demand- In every country, people buy and sell gold. This precious metal enjoys a truly global market. The presence of an enormous market makes it easy for an investor to find and get the best possible prices in the world for his investment.
Video from TheStreet.com for Investing in Gold:
How to Invest in Gold
There are some important aspects to consider before you invest in physical gold. The most important of these is that you will have to ensure safe storage of the precious metal by keeping it in a secure location. You also need to protect the gold from damage to ensure that your investment gets you the returns you expect. It is best to buy your gold in a form that is compact and easy to store so that both these needs are addressed. There are two forms of gold that are most popular among investors who are interested in physical gold.
- Gold Coins- Coins offer a convenient way to invest in gold. There are several options for you to choose from among coins- the American Golden Eagle, the Chinese Panda, Krugerrand, the British Sovereign etc. Typically, coins are available in different denominations ranging from 1/10th of an ounce to 10 ounces. Not all coins may be available in all denominations. The most commonly purchased coin is the one ounce version. This version comes in tubes, packed securely for maximum protection and safety. Priced at around $50, one ounce gold coins are quite an affordable investment even for a small investor. Compact as they are, gold coins are the easiest form of gold to store in safety and this is why the demand for gold coinage continues to remain steady even through changing economic conditions.
- Gold Bars- Bars are usually sold at a low premium over the actual value of gold content. Good Delivery bars are the best investment choices as these are of assured quality. This makes it easier to resell these bars at prevailing prices. Storage of gold bars is a more complex and cost consuming affair than storing the much smaller gold coins. Many investors address this issue by purchasing their gold bars through an exchange that also offers reliable safe keeping facilities. This is far more convenient, cost effective and easy than undertaking the safe storage of the bar yourself by placing it in a bank’s safe room.