Investing in Gold could be the one of the greatest ways to diversify individual portfolio income and escape one of our income sources from economic uncertainty and other financial crises. Investing in Gold has lot of benefits such as;
- It helps to build long term returns.
- Diversify that can help us to overcome losses during market crises.
- Overall improve people’s portfolio performances.
According to World Gold Council, every year gold performs approximately 10.9% annual return (from 1971 to 2024) and average annual return of gold is 7.9%. Despite that, the average hypothetical portfolio of gold over the past decade is around 4% to 15%.
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What are the Major Gold Investment Platforms?
Investing in Gold is nothing but investing either in physical gold or ETFs or other modes of gold forms. Let us dig more about one by one;
1. Invest in Physical Gold
Investing in direct physical gold is a major and popular mode of investment option in the World. Where investors buy jewellery, gold coins or gold bars (gold biscuits), which are pure gold and high karat in nature. Easiest way to obtain gold, investors need to pay a premium over the spot gold price and he must take delivery, insurance and storage for gold (since it is in physical form).
Gold bars can be purchased in 1, 10, 20, 50, 100 and 1,000 gram denominations and these small bars and coins account for annual global gold investment demand according to the global gold demand. Make sure that, gold price and large gold institution solely depends on the London Good Delivery bar.
2. Gold Exchange Traded Funds (ETFs)
Another popular mode of gold investment is Gold ETFs. Often called as Gold backed ETFs and Exchange Traded Commodities, where funds are traded on stock exchanges that hold gold assets or gold related investments. At present gold ETFs hold 1/3 of demand for gold as an investment. Here both individual and institutional investors track the performances according to the current gold spot price.
Compared to physical gold investments, it is easy to trade and requires no storage and costs less than physical gold. The interesting part is, customers who buy shares in ETFs do not need to trade physical gold directly, and instead they can buy shares in ETFs. Ex: SPDR Gold Shares (GLD).
3. Gold Certificates
Gold Certificates simply a paper certificates representing ownership of a certain amount of gold stored by any institutions like banks. Usually under Gold Certificates ownership of gold (physical) stored in a professional vault in banks or any other financial institutions on behalf of customers.
While he/she deposited a certain value of gold, he is eligible to receive a certificate which is the proof of ownership and he is also eligible to sell or withdraw his holdings. This type of investment is perfectly suitable for those who avoid physical storage, easy to buy and sell its gold value and exposure without physical handling.
4. Gold Future, Options and Forwards
Gold Future is an agreement to buy or sell particular gold in future at specific time, price, quantity and quality. Since it is a popular type of Gold investment that helps trade on regulated exchanges as well as help investors take short or long investment options.
Despite being complex, risky, one of the prime reasons to invest here is to increase security for invested gold, since it includes reducing risk and allowing them to trade according to their own performance. Usually these sort of gold investments are preferred by the corporate managements or institutional investors. Remember the fee or commission charged for trading is relatively low compared to other gold investment options.
5. Buy Gold Mining Stocks
Gold Mining Stocks is another popular option that usually comes with different considerations than bullion or other gold related assets. Under these stocks, when the price of gold rises, stocks can deliver higher returns compared to physical gold and positively help increase profits of an organisation.
Despite its advantages, Gold Mining Stocks are solely based on some factors like company decisions, mining operation costs, production and corporate responsibilities. Before going to purchase mining stocks, it is important to check the company’s financial health, production costs and shareholders values.
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