If you’re thinking about getting into gold investing for the first time, keep a few things in mind

One of the best things about gold investing is that its relatively simple, compared to most other forms of investment. You mostly dont need to worry about short sells, dividends, residuals, proxies, and all the other financial esoterica that tends to cause ulcers unless you really want to.

Even better, gold tends to be wildly profitable. Theres no guarantee the bonanza will continue as it has for the past decade or so, but lately gold does provide a better long term return than almost any investment you can name.

A Crucial Concept

Golds a great hedge against inflation, and it can certainly help spread the risk somewhat so that you dont suffer too badly during market corrections. But as with any commodity, you shouldnt put all your eggs in one basket.

Many experts suggest that you invest a certain percentage of your financial portfolio in precious metals, but they cant seem to agree on how much; Ive seen suggestions ranging from 3-15%, with some gold bulls suggesting even higher rates.

As an avid fan myself, Id suggest about 10%. But sit down and look over your finances carefully before you decide whats right for you. Keep this in mind:  golds value can compound nicely over a decade or more, so even a small percentage of your investment portfolio spent on gold offers substantial returns.

The Big Three

While there are, in fact, a number of ways to invest in everyones favorite previous metal, as a newbie youll want to stick to the Big Three: ETFs, gold mining or processing stocks, and physical metal.

An ETF, or Exchange Traded Fund, is a kind of security that tracks an index, basket of funds, or a particular commodity (in this case gold) but sells like a regular stock on a stock exchange. A gold ETFs price can change throughout the day, like any stock.

The good thing about ETFs is that theyre easy to buy and sell through a brokerage house, and you never have to worry about anyone stealing your physical gold. Also, there are tax advantages, since you dont have to give your state a cut of your profits.

The disadvantages are that you dont have immediate access to physical gold, which is a downer when you need cash in a hurry (or if you just like to admire the shiny beauty of gold bullion). Plus, if the stock market ever crashes again or the government collapses, your investment will go down the tubes in an instant.

Most gold mining and processing companies also produce stocks that trade on the open market. Like ETFs, you can buy or sell gold stocks through a brokerage, and you dont have to worry about theft; unlike ETFs, theyre keyed to one specific company, so theyre not nearly as stable.

So why bother? Well, some can be incredibly profitable, if the company grows and the share price increases. Alas, most are a wash, or lose money. Worse, you can lose your entire investment if the company goes bankrupt, or if the accountant decamps with the company funds.

Physical Gold

Perhaps Im biased okay, I am but I prefer physical gold to the paper kind. While theres some theft risk involved, you can vastly lessen said risk if youre careful and bullion will never become just so much toilet paper simply because someone mismanaged or gutted the company or ETF youve invested in.

Thats all the time we have today, Faithful Readers, but come back soon for a few more insights on physical gold investing including some handy dos and donts.