Top 10 Tips For Buying Gold in 2021
You’ve survived 2020 with all its uncertainty, economic instability, civil unrest, and a pandemic. It’s very likely you are now rethinking your investment portfolio and trying to come up with ways to ride out the economic downturn with the lowest amount of risk and potential loss.
Lucky for you, there exists on Earth an asset that has held its value for thousands of years. People worldwide have valued this asset, bought and sold it, passed it down to heirs, and used it as a hedge against volatility. Because of its long and rich history, investors globally consider gold to be the safe-haven asset everybody needs exposure to – especially during times like these.
While you’re pondering how to shore up your portfolio to make it as shock resistant as possible, consider these top 10 tips for buying gold in 2021.
#1 – Verify your online sources of physical gold
Before you make purchases of gold on the Internet, there are a few steps you can take to verify their legitimacy. Check their social media platforms that are usually listed at the bottom of the website to make sure they have strong followings and active feeds. This is a good sign that they are a legitimate business but by no means a guarantee.
Another quick way to research this is to Google the name of the company. Do you see it come up on the first page with a nice green check market to show Google has verified it? Another good sign. Always do your own research before buying gold online to make sure the vendors, mints, or collectors are legit. If you have doubts, it’s probably a sign to try another source or do some more research.
#2 – Invest in ways that ensure you have ownership of gold
Many investors prefer a set-it-and-forget-it mentality and have their broker handle all their investments, including gold futures or mutual funds. But another way to diversify gold holdings is to also have some physical gold on hand. That way, you have access in a way that grants you full ownership. This long and revered hard asset can be liquified in a pinch to access cash, whereas getting money from your broker can take days, with most offices only open during business hours.
Having a little physical gold set aside is a great way to reduce your overall portfolio’s downside risk. Another scenario that no investor wants to encounter is the case of a country or company going bankrupt. If you had paper certificates from either one, it might be complicated to retrieve your assets. Have some gold that you have full ownership of, as in the case of coins, bars, and jewelry, to help you hedge this risk.
#3 – Diversify your gold holdings
As stable as gold is, it does have its down cycles. Sometimes gold mining stocks will be surging to meet the demand following an economic crisis. But on the other end, during times of economic prosperity and stock bull markets, investors may forget about gold and focus on stocks, causing the price of gold to go down and make your gold mining stock prices plummet.
But in this scenario, if you were holding gold funds or ETFs, when the price of physical gold was suffering, you’d still be making gains because the rest of the stock market is surging. Having some physical gold, some paper gold, and some gold-related stocks may provide a more well-rounded portfolio overall.
#4 – Never invest more than you can afford to lose
The general rule of thumb in investing is never to commit more than 10% of your investment holdings in any one asset. Is this also true with gold? It depends. When your government’s economy is prospering, gold holdings may not seem as important, and 10% seems to be a logical percentage.
But what if your country is experiencing war and the currency is being debased rapidly to pay for a growing military? In that case, you may be worried that your other investments, like stocks, bonds, and cash may be losing their worth. So with gold, the 10% rule may not make sense if you are in a situation where you need to find a way to store your wealth, or you risk losing it all.
Overall, you would never want to invest in gold using funds from a credit card or loan, as the corresponding credit card or loan fees will likely outweigh any gains you would make on your gold holdings. Additionally, adding to credit card debt is essentially the antithesis of a good investment strategy, so avoid it at all costs.
#5 – Keep your physical gold secured and insured
It’s great to have some physical gold, but now what? Where will you keep it? Having a safe that is hooked up to an alarm system may help you sleep better at night. A bank deposit box may also give you peace of mind.
Be sure to protect your gold assets with insurance. Your home or renters insurance may or may not cover your gold assets in the case of a burglary, so additional insurance may be necessary to protect your valuable asset from theft, loss, or damage.
#6 – Have some gold coins on hand, just in case
Gold coins that come from an official government mint give you a way to store your wealth. But they also are considered legal tender and can be spent or traded in at banks. Even if a bank is closed, it is fairly easy to sell your gold coins at a pawn shop or gold dealer. This high level of liquidity makes gold even more valuable because you can use it in a pinch if you need it. At the same time, the physical coins can be safe in storage as a way to enjoy a safe haven from volatile markets.
#7 – Consider different types of gold stocks
There are several ways to invest in gold stocks. One is by investing in gold mining companies. When considering this option, be sure to study the gold mines involved. How many years of estimated production do they have left, and how much gold are they producing annually?
Timing is another important factor with gold stocks, especially mining company stocks. Mining companies extract gold at a very steady pace. The time when they ramp up production is normally following a big financial crisis. During this time, investors may be flighting to hard assets like gold to save their wealth. Due to the demand, gold mines may increase production, which could positively affect the stock price.
Gold investors can also purchase exchange-traded funds (ETFs) or mutual funds that have a mix of mining companies and other gold assets to provide increased diversification.
#8 – Buy physical gold from government mints, unless…
You can buy physical gold from private companies, but you may feel safer buying directly from a government mint. Either way, there are a few risks. With private companies, you don’t have a government backing it up. It’s essential to research and make sure the company is legit and that you are getting the purity that you are paying for.
There are not very many private mints, and there is plenty of data to back up the information on their websites. As far as government mints go, it’s normally a pretty safe bet that you will get what you pay for. But, if ordering online, be absolutely sure you have the correct website address and not someone impersonating a mint. Check for the URL and verify it on their official social media accounts.
#9 – Look into gold-backed digital currencies
Investment products that offer convenience often take center stage in today’s fast-moving markets. Overall, it’s a good thing that gold is so easy to buy and sell. But some gold dealers require a high minimum purchase price, such as $25,000. This amount also can go up during times of economic uncertainty when demand for gold increases.
Investors who don’t have large amounts to invest but still want to participate and grow their wealth can invest in gold-backed cryptocurrency. The convenience of online buying and selling is available, and purchasers can buy very small amounts at a time.
Gold investment products like Goldcoin provide you with an Ethereum based crypto coin that is backed 1:1 by gold holdings. People can invest in gold without having a large initial outlay, and at the same time, enter the crypto markets with a hard asset backing them up.
Another benefit to gold-backed crypto is that the transactions are clearly and permanently stored on a cryptographically secure ledger that is extremely difficult to hack due to its wide distribution of computers that support the network.
#10 – Consider your gold holdings like a savings account
When you think about gold, think about this: 4000 years ago, people were buying and selling gold and using it as a store of wealth. Fast forward to today, and investors are doing the same thing in response to the worldwide financial crisis. What all these gold enthusiasts understand is that gold is a hard asset and also a monetary currency – the best of both worlds. It’s highly liquid, unlike a pension account, and inflation resistant, unlike your savings account. Try to think of your gold investment in terms of long term savings. Let your gold sit and be there in times of need or let it pass down to your loved ones for the exact same reasons. The key is to think about it in terms of long term gains and wealth protection.
Investing in gold today and tomorrow
Investing in gold today is a tried and true way to diversify your investment portfolio for the long term. By having exposure to this precious metal, which has been highly valued for thousands of years, you are effectively hedging against inflationary assets such as cash and volatile assets such as stocks and Bitcoin. In 2021 and beyond, as investors prepare for the worst, gold shines as a safe haven beacon, long-tested and trusted, easily available, and with prospects for a long and certain future.
In fact, the future of gold is looking brighter every day. Many people may not realize this, but technology manufacturers highly value gold because it is chemically stable, malleable, non-corrosive, and a great conductor of electricity. With all these attributes, gold is a perfect metal for making circuit boards for mobile phones. With many emerging nations just getting started with technology, this creates an additional outlet for demand, making gold an even more valuable long term asset.
Demand for gold has shown steadiness and increasing value over thousands of years, and its future prospects call for increasing demand. Investing in gold now allows investors to take advantage of this high demand, low volatility asset.
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