So, you have decided that you want to protect your wealth and purchasing power with gold. But there are so many different ways to invest in gold, and you don’t know which one to choose. Thankfully, the choice is simple – it just depends on your individual investment goals and situation. But first, let’s reexamine the core reason why investing in gold is important, and go over the reasons why physical gold is the best of many alternatives.
Everyone should allocate a percentage of their investment portfolio to gold because gold is the best way to protect wealth from inflation and economic uncertainty. While other asset classes like stocks, real-estate, and cash can rapidly lose value because of wars, recessions, and inflation – gold, on the other hand, tends to retain value or even appreciate when everything else is crashing.
Recently, many gold investors have decided to buy gold through gold exchange traded funds and mining stocks. But this is a mistake. These indirect forms of investing in gold are much riskier than physical metal. With ETFs, for example, management fees on your holdings will add up, and in practice this can have much the same effect as inflation. As for mining stocks, the stock prices of these companies dramatically underperforms physical gold over the long run due to heavy debt loads and mismanagement in the individual companies.
Physical Gold: Gold Bars or Gold Coins?
Physical gold is the best way to invest in the precious metal because it doesn’t come with the negatives associated with mining stocks and gold exchange traded funds. However, buying physical gold is not completely straightforward because there are several different ways to buy physical metal, and the best method depends on your individual investment goals and situation. Generally, gold investors must choose between gold bullion bars and coins.
Gold bars are the largest and most efficient way to purchase and store large amounts of gold. They are usually also the most cost efficient because they have smallest premium over the gold spot price and the lowest markups for design and transportation. They are also easier to stack and more difficult to counterfeit.
Gold coins are smaller and more convent than gold bars, but they are also harder to store because they are easier to lose. Coins are less efficient than bars for holding large amounts of metal, and some of them may come with a higher premium over spot because they can be marked-up for design or rarity.
Which is Right for You?
The decision between physical gold bars or coins depends on your situation and goals. Gold bars are good for investors who have a large amount of money that they want to put into gold while coins are better for investors who don’t have as much money up front but want to slowly accumulate gold holdings. On top of that, coins are more useful for people who intend to use their gold as money – either now or at a future date.