Just Starting in Gold Investing

Gold rush, gold fever, golden touch, gold just has a lot of passion that goes with it. Unfortunately, passion has no good place in investing. You need to understand what you’re buying when you buy gold in today’s world. Gold is no longer needed as a currency. The world of computers has wiped the requirement of a means of keeping track of one’s worth. If the world gets so bad (as the gold bugs think) to wipe computers then you won’t need gold you’ll need food and guns. Now that we’ve wiped the crazy extremes off the table let’s talk about why you would actually consider investing in gold.

Gold Speculating

You can choose to invest in gold because you believe the price is going to take off for varying reasons. Either you can look at gold production and feel there will be a global shortage (either natural or man made like the diamond market.) You may also feel the jewelry sales will be on the rise which could increase the price of gold or high end electronics. The last common speculation is in bad economies, people rush to gold and you’re going to try and ride that wave. All of those could be valid reasons just make sure YOU know why your choosing and it makes good sense, not because some guy on the radio said so.

The next reason to invest in gold is to diversify your portfolio. The old saying goes “Never put all of your eggs in one basket.” Many people have all of their savings in stocks or cash. Each of those have their place in a retirement plan, but any of them could go sour at any given time. Gold historically has not kept up with the stock market, but certainly makes a good alternative to cash in savings earning virtually nothing. Also, gold is considered a good inflation hedge, as the dollar value drops gold tends to rise. I generally only keep enough cash for day to day needs and a small emergency fund, gold is a great alternative for longer term savings.

Types of Gold Investments

Investing in gold doesn’t just mean holding gold in a vault. You can own the gold at home in the forms of jewelry or coins. Also you in invest in gold ETFs which are stocks that mimic the price of gold. A different alternative is to invest in companies that mine gold, if the price goes up they go up, but if the price goes down they tend to find a way to stabilize their stock price.

© 2011 Beginner Investing

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