Interested in literally striking retirement gold? Here’s what you need to know about how to invest in gold for your golden years.
In this article:
- Physical Gold: The Direct Approach to Gold Investing
- Gold Stocks and the Stock Market: Indirect Investing in Gold
- Gold Mutual Funds: A Basket of Goods
- Gold ETFs
- Gold Coins
Strike Retirement Gold: Gold Investment Options for Retirement
1. Physical Gold: The Direct Approach to Gold Investing
Retirees should add income and asset protection to their retirement nest egg if they want a comfortable retirement. Investing in precious metals like gold and silver can be a way to fight back and grow your retirement savings.
Gold can come in many forms. Typically, physical gold is available for investing as:
- Gold bars — 7 x 3 5/8 x 1 ¾ inches at 400 ounces. Also known as gold bullion, these gold bars can be quite heavy.
- Coins — These have different sizes and purity levels.
- Jewelry — These also have different purity levels and sizes.
Gold bars don’t degrade with time. Bugs can’t eat them and they have the market flexibility since they can be used as raw material, a hedge against inflation, and an indicator of value.
Investors can have a direct investment in gold by:
- Buying gold
- Purchasing certificates that prove you own gold
- Buying jewelry and other items that have gold
Investing in physical gold requires special storage and documentation, which also incurs fees. A custodian, usually a bank, takes care of that but may have some storage fees.
Of course, you can keep the gold and store it yourself. However, there are risks, like misplacing it or theft.
Custodian banks or investment firms typically have insurance that pays out the value of the gold stored.
A tip when buying gold — study not just its origin but also its asset class and current value.
For an investment, the level of care is caveat emptor — buyer beware. Since physical gold typically ranges in the thousands of dollars, always do your due diligence.
You can enter your physical gold investment in an IRA. Usually, people use a self-directed IRA, but a traditional or Roth IRA can take gold as well, provided you talk to your custodian first.
2. Gold Stocks and the Stock Market: Indirect Investing in Gold
Having an Individual Retirement Account (IRA) and other tax-advantaged accounts can help protect your wealth. A retirement account can save you money from tax expenses, which can help you save for retirement.
Most retirement accounts have an investment in the stock market due to tax-free growth. Usual gold stocks traded on the stock market include:
- Mining stocks
- Jewelry manufacturers and retailers
An interesting thing about mining companies is that the movement of gold prices exponentially affects primarily those types of businesses.
Let’s say that a company uses capital worth $1,600 to mine gold that’s worth $2,000. That yields a profit of $400.
Next month, the market values gold at $2,200. While revenue increased by 10%, profits grew by 50%!
This rise in profit comes from the growth of selling gold.
- It was was originally $400 but is now $600.
- This means there’s a $200 increase, which is a 50% growth in profit. This allows investors to invest more in the company, which increases the share price on top of the incoming revenue.
3. Gold Mutual Funds: A Basket of Goods
For those who prefer having their investments managed by a manager, a mutual fund can help.
Mutual funds have experienced fund managers to take care of daily trades. They also have larger access to capital, information, and other resources that smaller investors do not.
Mutual funds also ensure that trades and companies under their management comply with rules and regulations. Lastly, mutual funds ensure that capital is properly diversified into several investment options.
On the other hand, mutual funds have fees incorporated as well. These extra fees can eat your growth.
A gold mutual fund invests in gold stocks. These funds seldom buy gold bars since the storage of physical gold has accompanying costs.
Gold mutual funds purchase both local and global gold stocks, which increases their diversification. However, as gold prices go down, so too will the value of a gold mutual fund.
4. Gold ETFs
Another way to invest in gold is through Exchange-Traded Funds or ETFs. An ETF functions like a mutual fund, but with fewer fees and movements.
An ETF investing in gold invests in gold stocks rather than physical gold and offers a broader investment compared to mutual funds. ETFs seldom change investment profiles and risk management compared to a mutual fund.
5. Gold Coins
Maple Leaf Coins and other collectible gold physical assets also offer an interesting way to invest in gold.
While we typically see investing in gold as a hedge against inflation, like real estate, physical gold has another market.
Rare and collectible coins like the American Eagle Gold Coin have the value of gold per ounce but are also collectible. These coins are not that difficult to buy and sell, and their value is growing.
Investors can choose to simply sell the coin with its weight in gold or to hobbyists and collectors.
Investors should think about the concept of “retirement gold” as early as possible. Investing in gold can help boost retirement savings, but as with any investment, due diligence is required from the investor.
I hope this guide has helped you understand more about investing in gold and the different options available for investors of different risk profiles and investing strategies.
What are your thoughts about investing in gold for retirement? How about other retirement asset classes and savings account? Let us know in the comments section below.
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