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Wednesday, April 16th, 2014


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How to Invest in Gold

People have always been fascinated with gold.  They viewed the idea of owning gold as a ticket to instant wealth. Anyone who has studied genealogy and researched their family tree may have learned about some intriguing stories of immigration, travel, and wealth from this era in history.

Between 1848 and 1855, and especially during 1849, approximately 300,000 ambitious people came to California by ship from abroad or by covered wagon from other parts of America, seeking their fortune.  In those days, such a trip was long and rigorous with many dangers along the way.  Some families starved to death before they made it to their west coast destination and they never realized their financial dream.  San Francisco grew into a large city as a result of the Gold Rush.

Today, if you’ve heard or read any advice about investing on the Internet or on TV, the word diversification surfaces repeatedly.  Not putting all your eggs in one basket is prudent because each type of investment performs differently during various economic trends.  For example, with downturns in the global stock markets during the second half of 2008, those who owned only stocks typically noticed the biggest overall losses in their portfolio.  Investors who also owned bonds and other investments such as precious metals, generally suffered less.

 Historically, gold, which is classified as a precious metal, has tended to perform inversely against stocks.  That means that when the value of stocks was declining, gold prices usually rose.   The California Gold Rush of 1849 is long over, but there continues to be much value in owning gold.  Gold has always been measured in ounces.  (You know that anything measured in such small increments has to be valuable.)  Gold sold for approximately $40 per ounce in 1971.  In December 2008, an ounce of gold was priced at $870.  Not a bad return on investment (ROI)!  Owning gold might be an ideal way to diversify your portfolio during today’s rocky economic times. 

 So how do you get in on this modern day gold rush? Must you head to California and stand bent over at the chilly river for hours, barefoot, wearing rolled up jeans and a tattered T-shirt, with a strainer in hand, exhausted, as you wait for some big chunks of the shiny stuff to float your way?  Panning for gold might be a fun vacation activity, but, there are other ways to own gold, most of which involve never leaving the comfort of your desk with your computer and a steaming cup of your favorite mocha.

If you feel comfortable with mutual funds, there are several funds that own stocks of gold companies. Fidelity Select Gold (FSAGX) is a large cap (capitalization) growth fund that has companies such as Barrick Gold (ABX) and Gold Corp (GG) as its main holdings.  Fidelity Select Natural Resources (FNARX) also a large cap growth fund owns precious metals amongst its holdings.  A minimum of $2500 will get you into these and other comparable funds.

 Exchange Traded Funds (ETF) have grown in popularity, especially within the past five years.  They each have their own category of holdings.  Some own gold and mining stocks.  Others such as SPDR Gold Shares (GLD) own gold bullion and not any company stocks.  ETFs trade like stocks so it is easy to buy and sell if you like to function more like a speculator rather than an investor.

 Owning individual stocks of gold, precious metals or mining stocks can be lucrative.  One advantage of purchasing individual stocks is that you avoid the management fees and expenses of mutual funds and ETF because essentially, you become your own fund manager.  Kincross Gold (KGC) or Newmont Mining (NEW), for example, can be purchased through an online discount broker in whatever number of shares that you choose.

 You can also buy bullion online in different quantities, rather than owning shares in corporations.  Look on several websites and spend time shopping around before you pull out your wallet.

 Coin dealers in or around where you live, have gold coins and bullion for sale.  Walk in with money, walk out with gold.  Your local commercial bank may also sell gold coins; give them a call and get the details.
 No one wants to be accused of being a gold digger, but when it comes to owning gold, it just might put you financially ahead of everyone else. Buying gold may be the perfect way to balance your investment portfolio.  If you do some research on the Internet and talk to people who know about investing, you, too, can have assets that shine. 

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One Response to How to Invest in Gold

  1. Debra Karplus, author says:

    I hope you will comment on my article.

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