How to Start Investing in Gold

Invest in Gold Bullion

Many seasoned investors know that a small amount of gold added to an investment portfolio can both improve returns and decrease risk. In addition, the recent popularity of investing in gold has spread to even the most amateur of investors. However, there are numerous ways to hold gold in a portfolio and each way has it's own distinct advantages and disadvantages.

Things You'll Need

• Brokerage Account
• Bank Safe Deposit Box
• Home Safe

Instructions

1. Determine the percentage of your investment portfolio that you want to keep in gold. A range of three to five percent of your total portfolio value is usually recommended as an allocation to precious metals, such as gold.

2. Decide on the following three options for adding gold to your portfolio. The size of your total investment portfolio and the percentage of your gold allocation will effect your decision regarding these options.

3. Option Number One: Hold gold inside a brokerage account using a gold exchange traded fund (ETF), such as the Power Shares DB Gold Fund(DGL), or a gold mutual fund, such as The Midas Fund (MIDSX). Advantages of using gold etfs or mutual funds are that they are easy to trade into and out of in a short period of time. There is no risk of theft from holding the actual gold bullion or coinage. There are no state use tax issues involved with holding gold assets in these forms. Disadvantages include not having direct access to gold bullion if it is needed for barter or trade during difficult times.

4. Option Number Two: Purchase and directly hold gold bullion or coinage in either a bank safe deposit box or home safe. Many bullion companies, coin dealers and even the United States Mint offer gold bullion and coinage for purchase by individual investors. Advantages of directly holding gold as an investment include having easy access to a universally recognizable form of currency for trade or barter in an emergency situation. Disadvantages of holding gold directly include the risk of theft and the expense of storage and protection for your gold holdings.

5. Option Number Three: Inside your brokerage account, purchase shares of gold mining and gold processing companies. The shares of gold miners and processors often trade in unison with the current gold price and they offer a safer alternative to owning the precious metal in its physical form. Advantages include the potential for capital appreciation from share price increases, when the value of gold bullion increases or new gold reserves are discovered. Disadvantages of owning the stocks of gold miners include the risk of loss of your investment capital if a gold mining company is mismanaged and goes bankrupt.

6. All of these options for including gold in your investment portfolio can be employed individually or in a combination of strategies. The addition of gold etfs, funds, bullion, or gold mining company shares can add long term value and stability if used wisely to diversify an investor's portfolio.

Tips & Warnings

• For the investor interested in directly holding gold coinage or gold bullion, premiums over the price of the spot metal can vary greatly amongst dealers. Comparison shopping for the best deal will help you increase the return from your gold investments.

• Storing or transporting physical holdings of gold can create the risk of theft or bodily injury to the investor. Special precautions should be considered before an investor ever takes delivery of gold bullion or coinage.