Gold investing dos & don'ts to know
Gold is a smart thing to have in your portfolio. Unlike stocks, which can fluctuate wildly with market whims, gold tends to hold its value, making it a solid hedge against inflation and other forms of market uncertainty.
It's also a great way to diversify your portfolio. A successful portfolio contains a mix of asset classes to mitigate the risk of any one class losing a significant amount of value. Because gold has historically been so stable, it's a good counterbalance against riskier investments like stocks.
It's easy to get started investing in gold, but you want to be sure to do it right. Below, we break down some dos and don'ts to consider when researching your gold investment options.
Start exploring your gold investment options today by requesting a free gold information kit.
Dos & don'ts of investing in gold
Keep these dos and don'ts in mind when deciding how to invest in gold.
Do explore investment types
There are many ways to add this precious metal to your investment portfolio. You have several options to choose from, including:
Physical gold: Physical gold, also known as bullion, comes in bar and coin form. This type of gold investment is highly liquid, meaning it's easy to sell if you need cash. However, you'll have to find a safe place to store it, such as a safe deposit box. Depending on how much physical gold you have, storage costs could eat into your total earnings.
Gold IRAs: Gold IRAs are long-term retirement savings plans. They come in two main forms, each with its own tax benefits. With traditional gold IRAs, your contributions are tax-deductible and you pay taxes on funds you withdraw. With Roth IRAs, your contributions are not tax-deductible, but you don't pay taxes on withdrawals. Because these are retirement plans, you may pay a penalty if you withdraw funds before age 59½.
Gold ETFs or mutual funds: Exchange-traded funds (ETFs) and mutual funds are an easy way to gain exposure to the gold market. You don't need to research gold mining companies to decide which stocks to invest in. Instead, a fund manager does the work for you.
Gold futures: Gold futures are essentially a wager on how much gold will be worth on a specific date. If you bet right, you could earn significantly more than if you just bought stocks. Bet wrong, however, and you could lose a pretty penny. Because they're risky and complicated to understand, futures are best for more experienced investors.
Request a free information kit now to learn more about investing in gold IRAs.
Do consider taxes
Different investment vehicles carry different tax burdens. For example, physical gold is taxed at the capital gains tax rate — up to 28% — when you sell it. Gold ETFs and mutual funds may be taxed comparably depending on when you sell your shares. Traditional and Roth gold IRAs may be taxed now or later. Be sure to include taxes in your decision-making process. If you need help making sense of the numbers, contact a financial advisor or tax professional.
Don't assume you're too old (or too young) to invest in gold
Wondering when is the best time to buy gold? The answer is: now! Because it's low-risk, gold is a smart part of anyone's portfolio, from young investors to seniors. The key to success is choosing the right investment type for you and investing the right amount. Which leads us to…
Don't buy too much
Most experts recommend putting 5% to 10% of your investments in gold. While it's a reliable safe haven for your money, you want to leave room in your portfolio for other asset classes to properly balance risk and reward. So if you have visions of swimming in a vault of gold coins like Scrooge McDuck, it's time to adjust your goals. You won't get the most bang for your investment buck that way (plus, swimming in coins sounds pretty uncomfortable).
The bottom line
As with any financial decision, there are pros and cons to investing in gold. Review your investment options carefully against your budget and goals, and don't hesitate to seek professional guidance if you're not sure which options are best for you.
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