During turbulent times, gold is a safe haven investment for traders around the world. Gold is a popular option for investment across the world. The yellow metal has always been considered one of the most secure investment options. With the current economic climate as it is, there is no surprise that gold prices on trading markets have been hitting all time highs. Given that the prices have risen close to 30% in 2020, with no end to the economic uncertainty on the horizon, you may be wondering how to make money from gold investment.
Portfolio diversification is hugely important for a modern day investor. Because of this, digital gold is a popular option when considering how to make money from gold investment. Diversification is not a one time practice but a continuous process that investors should follow, after carefully taking into consideration all financial goals and current situations to build a suitable portfolio.
Historically, gold is known to provide high returns and has been one of the best performing asset classes for years. If you are considering how to invest in gold, there are a number of online platforms and stock brokers offering digital gold today. Purchasing gold online is just a few clicks away.
What are the benefits of investing in gold?
There are a couple of key benefits if you are thinking about investing specifically in gold. Here is an outline of what you should expect from each.
Stability: it is often said that gold is recession-proof. In fact, according to the price trends and historical data, demand for gold increases during times of uncertainty. This may be economic uncertainty (e.g. a recession), as a result of currency weakness, or due to political instability within certain regions.
Ultimately, this stability is well showcased if you take a look at the price trends. Gold prices have risen steadily over the years, specifically when economies have been challenged. The case in point is the year 2020 where the price has hit record highs above $2,000.
Diversified Portfolio: a cornerstone of successful investing is to have a balanced or diversified portfolio. This is where gold and indeed other precious metals can come in useful. Having gold in your portfolio provides security and in many cases, it hedges against volatility and economic uncertainty due to the safe-haven nature of the asset. This is reinforced by the fact that the value is not particularly impacted by the same supply and demand reactions that influence most other assets.
What gold will bring to your portfolio is a level of consistency. It may not be the most high profile performer in terms of returns, indeed it is outperformed by most major stock indices and other assets over the longer term, but it has still averaged a very consistent rate of growth, particularly within shorter durations of time in cases of larger economic challenges.
How to make money from gold investment?
Investing in any new market or asset seems daunting to a certain extent at the beginning. This feeling fades once you realise that there are no real barriers to entry. The same is true with investing in gold. Actually there are many ways to kickstart your investment in the asset. While one of these is to purchase physical gold, there are more flexible ways to get involved.
Stocks: investing in gold-related stocks is an excellent way to get started. You will not directly own the actual gold, but you will directly benefit from any uptake in companies which are directly impacted by the prices of gold.
Investing in the likes of mining company stocks also means that you have a good degree of liquidity since you can easily buy and sell your holdings, which is one of the challenges if you hold physical gold.
ETFs: similar to investing in gold stocks, you could opt for gold-related ETF or mutual funds. These are basically investments in baskets of gold-related companies, like you would get with a stock. The difference here is that you will not have direct ownership of the underlying stocks and an investment in multiple companies in this manner is certainly more diversified.
This is a more balanced, conservative investment method which retains a lot of liquidity for you as a trader, though it could involve some fees and other conditions. Due to this, these are more suitable investments for non-beginner traders if you are considering how to make money from gold investment.
Futures and options: another alternative you have when investing in gold or other commodities is to trade on the futures market. Futures are basically agreements to buy an asset, in this case gold, at a particular point in the future for a certain price. These are very popular trading markets and can be extremely liquid.
This liquidity can be a positive if you need to trade your gold investment quickly, though you should note that the futures market can be quite volatile and futures and options trading is considered quite high risk; it is for the most part only suitable for experienced investors.
Physical gold: there are several ways to buy physical gold. The most common way to buy is by purchasing gold bullion which is certified as near pure gold and typically purchased in the form of gold bars, or certain gold coins. It is available from many certified and trustworthy sources around the world.
Who should buy gold?
In reality, an investment in gold can be suitable to almost everyone, but for a variety of reasons. It is an excellent addition to any portfolio as a consistent performer which can add a great amount of diversity to your portfolio depending on the way you invest.
Particularly in the current uncertain economic climate, an investment in gold could be a wise choice as reflected in the current record high prices.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.