Gold has always been a popular investment option, and this year, it’s been especially in demand. After years of economic turmoil caused by issues like inflation and high interest rates, and even a string bank failures, investors are looking for ways to secure stability and reliable performance in their portfolios — which is precisely what gold offers.
You aren’t just limited to one type of gold investment, either. There are many ways to invest in gold, from retirement accounts like gold IRAs to gold futures contracts. But for many people, the investment type that comes to mind initially is the most traditional one: physical gold. Are gold bars and coins the best way to invest in this precious metal, though? To answer that question, it’s important to understand the pros and cons so you can make an informed decision.
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Should you buy gold bars and coins?
As with any investment, there are advantages and disadvantages to buying gold bars and coins. Here’s what you need to know.
Pros of buying gold bars and coins
There are many benefits to investing in gold in general. It can diversify your portfolio, hedge against inflation and provide a safe haven for your money. In addition to these, investing in physical gold in particular offers the following benefits:
Tangibility: Unlike digital investments, such as stocks, gold bars and coins are physical assets you can hold in your hand and inspect. They’re not an abstract concept that exists on paper or on a screen. Some investors prefer the peace of mind and satisfaction this offers.Liquidity: Gold bars and coins are highly liquid assets, which means it’s easy to sell them when you need to. Other tangible assets, such as real estate or art, can take months or even years to sell, potentially resulting in a loss of value. But you can sell physical gold quickly and easily to numerous dealers and buyers to free up cash or take advantage of higher gold prices.Many sizes and weights: Gold bars and coins are available in many different sizes and weights, which makes them an easy way to invest as little or as much money as you like.
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Cons of buying gold bars and coins
Keep the following in mind when deciding if physical gold is the right investment for you.
Initial cost: Gold bars and coins have a premium attached to them, which means you’ll pay a higher price than the raw gold value. Coins can be the pricier of the two due to their intricate designs and collectible nature. This could reduce your return on investment when you sell.Storage and security: While you can store your physical gold in a safe at home, you run the risk of losing it in a robbery or fire. For this reason, many investors choose to store their gold in a secure, off-site location. You’ll also want to obtain insurance to protect your investment. Insurance costs and storage fees can both eat into your potential returns.Tax treatment: When you sell a gold investment, you’re subject to capital gains tax on your profits. Some gold investments, such as gold stocks and gold ETFs, are taxed at one of three rates based on your tax bracket: 0%, 15% or 20%. But since the IRS considers physical gold a collectible, it’s taxed at a rate of up to 28%. Take this into consideration when estimating how much you might ultimately get from an investment.
Want to know more about other ways to invest in gold? This free investment guide is a great place to start!
Other types of gold investments
If you decide bars and coins aren’t the best option for you, there are plenty of other ways to add gold to your portfolio. They include:
Take the time to understand how each type of investment works and its pros and cons to find the one that’s best for you.
The bottom line
So, should you invest in gold bars and coins? The answer to that question depends on your investment goals and risk tolerance. If you’re looking for a tangible, liquid asset with multiple purchase options, investing in gold bars and coins may be a good choice. But be sure to weigh the perks against the added hassle and cost that comes with buying and storing physical gold.
If you do decide to purchase gold bars or coins, be on the lookout for scams. It’s easy for a seller to hype up the rarity of a coin, but do your research and watch for common red flags. Stick to reputable sellers with a long history and solid track record, and when in doubt, speak with a trusted investment professional before making any decisions.