Are you planning on investing in gold? It may sound interesting given the general information regarding the impression that gold prices are the most stable in the trade market. However, there is more to the face value of this precious good.
Nowadays, if you’re considering to invest in gold at BullionVault or other similar online investment firms, it’s always good to browse around and even do a background check. That’s actually one of the many advices The Federal Trade Commission (FTC), the nation’s consumer protection agency, says.
FTC advises to always “investigate before investing.” Here are a few tips from them:
· Ask for the melt value of bullion coins or collectible coins, if you choose to invest in physical gold. “The melt value (the basic intrinsic bullion value of a coin if it were melted and sold) for virtually all bullion coins and collectible coins is widely available,” FTC explains.
· Go to consulting with a reputable dealer or financial advisor with specialized knowledge in gold investments.
· Independent appraisal of the specific gold product you’re considering is a must. “The seller’s appraisal might be inflated,” FTC advices.
· Consider additional costs like insurance, a safety deposit box, or off-site storage rentals, as they will cut into the investment potential of bullion.
· When buying, some sellers deliver the gold product to a secured facility rather than to you. Certify that “the metal exists, is of the quality described, and is properly insured,” FTC notes.
· Minimized risks or risk disclosures as mere formalities? Walk away. FTC points out, “reputable sales reps are upfront about the risk of particular investments. Always get a receipt for your transaction.”
· “Refuse to ACT NOW,” FTC forewarns. Urging to buy immediately is another “walk away” signal.
· Do an online search of the company name you’re interacting with. “Read about other people’s experiences with the company. Try to communicate offline if possible to clarify any details. In addition, contact your state Attorney General and local consumer protection agency. This kind of research is prudent, although it isn’t foolproof: it may be too soon for someone to realize they’ve been defrauded or to have lodged a complaint with the authorities,” FTC concludes.
After being well-aware of how to transact properly when investing in gold, the next essential knowledge one has to know is to be familiar with the types of gold investments that you can choose from. Each investment type has its own advantages and disadvantages, and it is imperative that you define your own needs for deciding in this financial transaction. Below are the types:
Physical Gold – this can be gold bars, bullion and bullion coins, collectible coins, and even jewelry. Now because of the different product types their corresponding prices vary. Alix Steel of TheStreet.com advises in an article how to invest in gold, “When you buy gold coins or bullion, avoid big premiums. You want to buy gold as close to the spot price as possible, or a 10% premium at most. The higher the premium, the higher the gold price will have to rise in order for you to profit.”
Gold Exchange-Traded Funds and Notes – “Gold ETFs are a popular way to have gold exposure in your portfolio without the hassle of storing the physical metal,” while in ETNs, “You give a bank money for an allotted amount of time and, upon maturity, the bank pays you a return based on the performance of what the ETN is based on, in this case the gold futures market,” Steel differentiates.
Gold Investment Stocks – they can be mining firm stocks or mutual funds invested in the gold industry. “Investors can purchase shares in publicly traded companies involved in gold mining and related enterprises. However, these companies’ fortunes don’t necessarily track with the price of gold,” according to Chris Hyzy, chief investment officer at U.S. Trust, the private wealth management arm of Bank of America in New York, as quoted by Marcie Geffner of BankRate.com.
Knowing the basics is just the beginning. If you can seek assistance from a licensed broker or expert, it will be all the better. Going into this type of venture alone is like going to a forest without anything. The more you learn further and understand, the better are your chances to invest properly and secure your finances.
Ray is an ex-financial adviser and the founder of Financial Highway. Currently working in the financial industry and working towards completing his Chartered Financial Analyst, CFA, designation.