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How To Invest in Gold:For thousands of years, gold and other precious metals have served as stores of value. Amazingly, while all other currencies have come and gone over time, the real value of gold over several millenia has endured. You can buy about as much for an ounce of gold today as you could in Roman times. Gold became a favorite investment vehicle back in the mid to late 1970s, when high oil prices and high inflation took a toll on the economy, forcing investors to look elsewhere for good inflation-adjusted returns. Enter GOLD! During the late 70's and early 80's, gold went up in value over 800%.
Best Advice for Investing in GoldInvesting in actual gold coins and gold bullion is not easy. First, you face buy and sell spreads whenever you trade, eating into your potential profits. Secondly, and perhaps most seriously, you face the risk of theft or loss if you hold actual coins. One alternative is the new exchange traded fund (ETF), trading under the symbol GLD. This fund holds actual gold reserves and its value mirrors the price of 1/10 of an ounce of gold (ie, gold trading at $600, one share of GLD trades at approx. $60). ETFs are very cost efficient, with minimal admin fees (usually less than 1/2 of 1%, where mutual funds can have expense ratios ranging from 1-2%). They are also easy to trade, with real prices all through the trading day, unlike mutual funds which only allow shares to be exchanged after the close of the market. GLD lets you invest easily in gold without worrying about taking actual delivery of any of the precious metal.Best Gold StocksSome of the leading gold mining companies are Barrick Gold (ABX) and Newmont Mining (NEM). Both own gold mines around the globe and profit as the price of gold increases. Some gold companies use hedging to guarantee minimum gold prices, and hence they are protected during downturns but often miss out on upturns in price. Of course, when you invest in an individual company, you also take on the risk of anything happening to that company outside of the gold market - labor strikes, fraud, mismanagement, disasters, etc. For many, this make gold mutual funds look more attractive by lessening risk. One of the best performing gold funds is the Tocqueville Gold Fund (TGLDX), bringing home recent annual returns of 30%, -8%, 53%, 83%, and 21%. Tocqueville invests in various gold mining companies, such as Goldcorp, Gold Fields, Newmont Mines, Ivanhoe Mines, Randgold, Yamana, Cameco, and Placer Dome (as of 12/2005). Some other top-rated gold mutual funds are Vanguard Precious Metals (VGPMX), US Global Investors (UNWPX), Evergreen Precious Metals (EKWAX), First Eagle Gold (SGGDX), and Oppenheimer Gold (OPGSX). Always do your due diligence and research any funds or stocks before investing.
If gold continues to increase in value as many gold bugs are currently predicting, we could be looking at gold prices of $1000 or more in the coming years, and investing a limited portion of your portfolio in gold will help you share in these potential returns.
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