Gold is on the rise. As of November 2024, the price of gold exceeds $2,600 per ounce, almost 500% higher than 20 years ago. With such impressive growth, it’s no surprise that 85% of professional investors now own gold, up from 69% in 2018, according to the World Gold Council.
What about retail investors? Investments in gold can be attractive, but can also be overwhelming. Many new investors make serious and costly mistakes when they start investing their money in investment projects. precious metals.
To better understand how to avoid them, here are some of the most common mistakes new gold investors make.
1. Not taking into account storage costs
When you buy goldyou need to think about how to store it. If you are purchasing physical coins or bars for yourself and want to store them yourself, you may need to consider purchasing a secure safe or renting a safe deposit box from a local store. bank or credit union. Additionally, you may want to consider purchasing insurance coverage for your physical assets.
If you invest in gold through a precious metals individual retirement account (IRA), you cannot store your gold at home due to IRS rules. Instead for gold IRAsyou must use an approved custodian, which is often recommended by the IRA provider.
Storage costs vary depending on the company, the value of your assets, and whether you choose separate storage. Assuming you have less than $100,000 in gold, you can expect to pay between $4 and $50 per month.
2. Don’t research gold dealers before buying
Gold suppliers vary widely in price, reliability and customer service. But best gold traders are known for their reliability and reliability.
While gold prices are consistent across the industry, you’re not just paying the going rate per troy ounce. You also have to pay the gold supplier’s premium. Rates vary by company; Depending on the gold supplier, you can expect to pay between 2% and 8% above the spot price (or current market price) of gold.
Additionally, the industry has had problems with unscrupulous companies in the past. The Federal Trade Commission and the Commodity Futures Trading Commission (CFTC) announced lawsuits and actions against certain gold mining companies that provided unlawful investment advice or made fraudulent misrepresentations.
You can find information about a company’s reputation by looking it up on TrustPilot, or you can contact the CFTC or the National Futures Association Check the company’s registration status, background and disciplinary history.
3. Trying to time the market
The old adage, “time in the market is more important than time in the market,” doesn’t just apply to stocks. With any type of investing, the goal is to buy low and sell high. However, new investors often lose money because they try to time the market or delay buying gold in anticipation of a price drop and sell too early due to concerns about changes in the market. These can be costly mistakes.
GoldLike other assets, it regularly experiences price fluctuations. Its price goes up and down with economic changes and demand. However, over the long term, such as 10 years or more, gold has delivered impressive returns. Plan to buy and hold gold over several years (or decades) to maximize your chances of success.
4. Buying new gold coins or gold bars.
As a new investor, you may be surprised by the sheer number of options for gold coins, rounds, bars and bars available for sale. In addition to the standard options, you will also see special commemorative or new items. For example, you can buy licensed coins such as Snoopy coins or Marvel Iron Man coins.
These coins typically cost significantly more per ounce, and their value could fall if demand slows or collectors move on to another trend. Additionally, these forms of gold are not approved by the IRS for use in gold IRAs. IRA eligible coins must meet certain purity standards and be produced by approved mints, so only select coins and bars meet these criteria. For example, some approved options include American Gold Eagle coins and Canadian Maple Leaf coins.
5. Not diversifying your portfolios
Gold investors sometimes put all their money into one coin or investment choice. But whether you’re investing in the stock market or precious metals, diversification is critical.
Instead of investing in one coin or bar, you can invest in different types of gold assets. For example:
- Physical gold: Investing in physical coins, bars, or even gold beans can be a good way to invest in precious metals if you prefer to own tangible property.
- Gold Exchange Traded Funds (ETFs): For those who don’t want to worry about storing and managing their own gold reserves, an ETF can be a good alternative. Gold ETFs pegged to the price per ounce of gold or contain baskets of shares of gold mining companies. These ETFs provide exposure to the gold market without the commitment of owning physical coins. ETFs are also more liquid because you can buy and sell shares on the market.
- Shares of gold mining companies: Another way to invest in the gold industry is to invest in gold mining stocks. With these investments, you can benefit from gold’s performance without having to own the underlying physical asset.
Investments in gold
Investing in gold can be a useful way to diversify your portfolio and protect your finances from market movements. However, it is important to do your homework: research gold dealers, compare prices and storage fees before purchasing, and choose your gold coins or bars carefully to ensure they meet your investment goals.
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