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Guide to Gold Investing

Beginner’s Guide to Gold Investing: 7 Important Principles to Follow Before You Begin

Investing in gold is a prudent move given the ability of gold to store value. Prized for its non-corrosive elements and beauty, gold is an asset and investment which despite the volatility of its price, is perceived as a defensive investment.

With the current global environment of high debt levels and the high asset prices, a lot of investors have preferred the safety of gold stocks to give them an edge over any possible catastrophe. However, one mistake most people make when it comes to gold is presuming that investing in gold is similar to holding a physical commodity. In the short-term, it’s true that the share price for gold will be governed by the changes in its price, but over the long-term, an investor needs to realize that what they are doing is investing in a business that is meant to generate sales and revenue, make profits, and pay expenses.  Therefore, when it comes to gold investing, it’s imperative to know what you are venturing into. Here are the most important principles to have in mind before investing in gold.

Financial Plan

When it comes to gold, you need to remember that you have to invest intelligently. Intelligence, in this case, does not refer to a get-rich-quick approach. Rather, investing intelligently includes allowing yourself to attain certain financial goals using a financial plan that has been carefully crafted.

Different investors may create and execute different strategies of investment. For instance, younger individuals may prefer to invest in liquid assets so they can use the funds in the future to cater to their expenses. For older individuals, however, a plan that maximizes asset appreciation may be their most preferred approach to investment since they may need to use their returns during retirement.

Therefore, before investing in gold, you need to know what your financial goals are. To achieve this, you will need to develop a financial plan in accordance with your expectations. Gold investing is ideal for a long-term financial goal.

Politics is Crucial

Before investing in gold, you need to pay attention to political events. There are so many aspects in a country that could hamper your possible returns on an investment. Things such as legislative agendas, presidential elections, political riots, among others could have an impact on the price of gold.

Since political tides often change without warning, you need to be on the alert so you can know what is taking place not only in your capital but also in the world at large. Generally, instances or incidents that create uncertainty, as well as political unrest, could easily increase the price of gold. As many people seek out investment opportunities such as gold, its worth may skyrocket dramatically.

With that in mind, the best time for you to invest or buy gold would be at a time when the economy is calm and stable not only in your country but in the entire world as well.

Justify Your Investment Reasons

Before you can purchase gold, you need first to ask yourself why this kind of investment is of particular interest to you. It’s not recommended to simply purchase an investment due to analyst reports that claim a particular metal or gem will increase in value in the next years to come. Instead, ensure you scrutinize and analyze the fundamentals of your investment such as the margins, and focus your attention on the reasons behind the investment you prefer.

Do not undermine this concept. A few months down the road, you may experience some rocky patches, or the company you choose to work with may undergo bad experiences due to internal and external market forces. However, as long as you know your initial reasons for investing, you will be in a position to get rid of your feelings from the situation and assess rationally what your next steps would be.

Get the Timing Right

When you want to invest in gold, make sure you time you purchase appropriately. You will need to consider a myriad of national and economic trends, as well as the appropriate time to make the purchase. Experts have identified March to be the best time to purchase gold because prices are often at their lowest. You also need to make sure you purchase your gold from trusted precious metal retailers such as LPM.hk so you can be certain that what you are getting is authentic.

Consider Long-Term Investment

One of the greatest downfalls of the current investment strategies is investing in the short term. Great gold investors realize that once you purchase gold at a favorable price, it takes some time for the market to respond in favor of the investment. Therefore, when you are investing in gold, you need to remember that long-term investing is the most essential principle since trading in the short-term results in poor long-term performance.

Utilize Risk Control Strategies

Since it is imperative to not lose your investment, you need to make use of risk control strategies. The volatility of your portfolio is a killer of investment return. If you fail to control risk, you may end up suffering in the bear markets. Preventing the drawdowns of your gold investment portfolio should be your major priority when it comes to investing in gold.

Diversification

In addition to long-term investing, diversification is a powerful and smart investment principle. When you invest in different asset classes such as Gold, Silver bullion and certified coins, you will be confident that when one is down in value, the others will still hold you up. Other areas of diversification also include stocks, cash, and real estate. Each of these classes of assets has its own risks and returns that could easily meet your varying financial needs. Therefore, holding different investments will go a long way in reducing your overall portfolio risk.

Final Word

By its very nature, investing can be a risky affair. Nonetheless, this does not mean you should deposit your money in products that earn low interest or be careless with your finances. Investing in gold is one of the most prudent steps you could take to ensure your finances are secure.

Tina Roth

1 comment

  • I’m not sure that gold is an investable asset if you’re looking for growth. Without any cash generation how do you assess the value? Surely the value is driven largely by speculation – I can’t imagine that the demand for gold changes that drastically over time

tina roth

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