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Physical gold vs. gold stocks: How to choose your best gold investment

Physical gold is generally tied to the value of the precious metal, while gold stock performance may be influenced by additional outside factors. Getty Images/iStockphoto

Whether you're looking for a way to combat inflation while prices are still high or you want to diversify your portfolio against market uncertainty, there are plenty of reasons to invest in gold today.

To get started with your gold investment, you'll need to decide how you'll make it. There are a few different ways to invest in gold, but two common options are physical gold in the form of bars and coins and investing in gold stocks for companies in gold-related industries whose performance can rely on gold's value.

Find out more about gold investment options today with a free information kit.

Physical gold vs. gold stocks: How to choose

If you're on the fence about how you'll add gold to your investment portfolio, here are some benefits and drawbacks of both physical gold and gold stocks to consider.

Benefits of physical gold investing

  • Tangibility: Buying physical gold bars and coins allows you to hold your investment in your hand and potentially store it at home for your own safekeeping.
  • Direct access to gold's value: Unlike more indirect gold investment options, buying physical gold means your investment is entirely dependent on gold's value over time. This could be a good option for you if you are investing in gold as a longstanding store of value and hedge against inflation, since you may benefit directly when gold prices move independently from other markets.
  • Liquidity: Gold bars and coins are recognized as valuable across the globe, and have been for centuries. Though gold benefits long-term investors, if you ever need to sell your physical gold investment, you'll likely have no issue getting a fair market price.  

Explore more gold benefits to find if the precious metal is right for you with a free investors kit today.

Drawbacks of physical gold investing

  • Buying process: To add physical gold to your portfolio, you'll need to find a reputable dealer online or in-person. This can take some research to ensure you're getting a good price while finding the weight and purity you're looking for and avoiding any potential red flags or scams.
  • Storage: When buying physical gold — or keeping it in a gold IRA for retirement — you may need to consider third-party storage options. While you can store physical gold at home, it may be easier to pay for a bank safe deposit box. And if you have a gold IRA, you'll need to work with an IRS-approved custodian.
  • Cost: The overall cost of your physical gold is something to consider upfront. Not only should you expect a markup on the price of your gold per ounce, but there may be additional fees for storage or, if you're using a gold IRA, account management. Plus, it can be smart to insure your physical gold, which can add to the fees.

Benefits of gold stocks

  • Buying options: Unlike physical gold, you can buy gold stocks directly from the brokerage you use for your existing investments. If you don't want to worry about finding a reputable dealer or storage, this can be a simpler option.
  • Growth potential: Gold stocks aren't just a gold investment; they're also an investment in the gold-related companies. If the company you own stock in does well, that could potentially bolster your portfolio. 
  • Price: There are a number of gold ETFs and other gold mutual funds that allow you to invest in gold with relatively low fees compared to the added costs and potential markups on physical gold.

Learn more about your options for gold investing with a free investment guide today!

Drawbacks of gold stocks

  • Outside factors: Just as your stock investment may do well if a company does well, it can also suffer when business is poor. Not only can your investment depend on gold's current value, but it may also rely on other factors influencing business decisions and performance.
  • Indirect gold investment: If you're relying on your gold investment for its benefits as a non-correlated asset to other markets, investing in it indirectly via stocks or funds could mean it doesn't always perform as independently as you may expect. This could make it more difficult to gain gold's benefits during periods of inflation or recession. 

The bottom line

If you want to invest in gold today, choosing either physical gold or investing in gold stocks and funds can help add stability to your portfolio and diversify against market fluctuations over time. But it always helps to research your investment options and decide which may be better for your overall financial plan and goals. Before you invest, consider speaking with a financial advisor who can help you work out your individual plan. Start by learning more about gold investing with a free information kit today.

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