Precious metals such as gold hold their value well over time as they usually make most investors’ portfolios. Contemporary investors try to have at least 5% of their investments in precious metals to diversify their portfolios. This effectively spreads out the risk in their portfolio. Gold and silver are the most popular ones, followed by others like platinum and palladium. Investors buy gold because it is a great reservoir of value.
During economic downtimes and when everything else is deteriorating, gold usually performs well. So, if you’re a young entrepreneur, gold is a good option for you for the long haul. The good thing is time is on your side and there’s no need to rush.
That said, here’s a list of options available to you if you wish to invest in gold.
1. Gold Individual Retirement Accounts.
Gold Individual Retirement Accounts (IRAs) are a modern twist to retirement fund planning. Typically, retirement fund accounts are created based on a cash or other cash equivalents, such as stocks and mutual funds. People refer to these as traditional IRAs. But instead of using cash and cash equivalents, gold IRAs use gold.
Gold IRA companies count on the fact that gold holds its value well over time. Although the price of gold fluctuates, its intrinsic value always remains intact. This is regardless of what happens in the economy or your business. So, it provides a safety net for gold IRA account holders in the very long run.
As a young entrepreneur, using a gold IRA makes sense because gold hedges your business against inflation. Inflation erodes the value of money over time. However, depending on the quantity of gold amassed in your IRA, you’ll have a fair takeout in the end.
2. Gold Bullion.
This is for young entrepreneurs who prefer to hold gold in its physical form. Bullion gold bars come in many shapes and sizes. Owning bullion comes with security risks and costs, such as storage costs.
The more gold you have, the more difficult it is to store it securely, especially if you’re keeping it in your house. Therefore, you may have to invest in expensive, top security safe to keep your gold safe at home. Or, you can store it in a bank, financial institution, or a precious metal depository. These storage methods usually come at a fairly high cost. So, they are sensible options only when you own a lot of gold bullion. If you have little, it may not be the most economical option.
You might want to look for a financial advisor to help you choose the right broker to partner with because of the risks involved. You certainly don’t want to invest in a fake business. Although if you’re a young entrepreneur, you’re most likely vulnerable to scammers. Hence, watch out for dealers who promise suspiciously high returns on investment and speak to your financial advisor first.
3. Gold Coins.
For those who prefer holding gold in its physical form but have leaner budgets, gold coins are a perfect choice. They come in various sizes as well but mostly range between one to two ounces. Gold coins can be stored easily and are collectible. Just like with gold bullion, you need to partner with reputable and licensed dealers.
4. Gold Stocks.
This is probably the most straightforward option you have. Buying stock from a company that mines gold allows you to own gold without physically handling it. Just like any other stock, you benefit from getting dividend payments. Hence, this is a relatively safe investment.
However, make sure you buy stocks from the right company. A financial advisor could also help you pick the companies with the best-performing stocks. Moreover, note that individual companies’ financial performance can affect both the price and the performance of stocks. So before making a wrong decision, do your research and consult an advisor. The end goal is to get a good return on your investment.
5. Electronically Traded Funds.
These are perhaps the most liquid form of gold investments there are on the market. They are traded very much like stocks. If you want to invest in the gold market, Electronically Traded Funds (ETF) are good means without having to invest in the physical form of gold. So, ETFs are flexible as you can have a small share of gold-backed assets in your portfolio.
Since they’re traded like shares, you don’t have a claim on physical gold. Also, remember that fund managers could decide to sell the gold in the fund for various reasons, such as to cover costs and expenses. Therefore, it’s imperative to look for a well-managed fund.
6. Mutual Funds.
Similar to ETFs, these mutual funds let investors pool their funds together to invest in gold-backed assets. The benefit of mutual funds is that since there’s a large financial pool available, there’s great potential for high returns if your fund invests in the right assets.
Also, mutual funds are relatively safe but not as flexible and liquid as ETFs. Mutual funds count on their expertise and financial resources to create wealth. This is what you want as a young entrepreneur. Hence, well-performing mutual funds can be a good option for you.
7. Options And Futures.
Options and futures are risky because they are derivatives. This means their value is determined by or derived from the value or price of another asset. So, it’s a speculative investment option that might be the least safe choice for beginners. This could be like legal gambling and there’s no real guarantee your investment will yield a return.
A futures contract is a deal wherein you agree to buy or sell shares at a certain future date. An options contract gives you the choice to buy or sell stock by a certain date or when it reaches a certain price.
Those people who choose to invest in futures and options need to always monitor their accounts to sell or exercise their options before it’s too late. There’s also a certain amount of leverage or debt with these two options. So, be careful not to invest all your money in futures or options because you could make an enormous loss.
As a young entrepreneur, you should realize that you’re still new and have time to invest in the long run. You may also want to educate yourself first to know how it works and discover what options work for you. Gold is an excellent asset to have in your investment portfolio because it’s relatively stable, as well as other precious metals such as silver. If you’re unsure, you can always consult a financial advisor for assistance.