10 Tips for Investors Interested in Gold

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As the year comes to an end, a lot of investors are reviewing their portfolios and you are no exception. You have done your research, you have asked the right persons and reviewed all the information you have seen on the news (or the Internet). 

You have decided that you definitely want to invest in gold this year.  What to do next?

Consider these 10 tips:

  1. Know what kind of investor you are. Keep in mind your original reasons for investing in gold. In order to assess whether an investment really benefits you, you must clearly determine your long and short term objectives, financial availabilities and attitudes towards risk.   
  2. Stick with your Investment plan. Don’t abandon your strategy on daily market changes. Keeping investments raises the likelihood of better returns since investments generally thrive in the long run. Markets can be unpredictable and volatile. Staying firm through the ups and downs is the best way to achieve your long-term goals.
  3. Only invest as much as you can afford.  Eliminate debts for which you pay high interest first and clear your current financial situation before making investment decisions. Allocate the surplus between your income and your common expenses to the investment.
  4. Buying gold is only half of the investment equation. Seek advice on how to eliminate currency risk. According to the Forex’s Glossary, Currency Risk -sometimes referred to as exchange rate risk- is the possibility that currency depreciation will negatively affect the value of one's assets, investments, and their related interest and dividend payment streams. This is particularly applicable for securities denominated in foreign currency. If you’re holding gold, you essentially have a long US dollar exposure. The relationship between the US dollar and CAN dollar, for example, is therefore important when calculating the value of your investment.
  5. Buy through a reliable, trustworthy source. The Federal Trade Commission reports a rise in boiler rooms* hawking gold coins or bars, so beware! On their website, you will find an extensive list of guidelines to help you avoid scams.
  6. Paul Mlladjenovic, the author of “Precious Metals Investing for Dummies,” suggests holding 10% of your investment portfolio in precious metals such as gold or silver. According to this advice,  what percentage of assets you hold in precious metals is a function of how much you hold in your core position as insurance for worst-case scenarios, and how much you hold as investments for other scenarios. Another reason to  set long-term goals.
  7. Review your investment, annually. While it’s not healthy to monitor your investments every single day (see point 2), it is smart to look things over occasionally. An annual review lets you shift money around, if needed and review your investment strategy.
  8. Learn about the Spot Price of Gold. SBC Gold explains that if you set out to buy gold coins or bullion for your portfolio, you are actually buying against a spot price calculated on an electronic/paper market independent of current physical supply. Likewise, the price of gold at which you sell gold coins or bullion is based on the same calculation of a current gold spot price.
  9. Be aware that all investments carry a risk. Remember that getting more earnings takes more time. Invest calmly. Magic solutions do not exist and hasty decisions are often wrong.
  10. Enjoy your investment.

 

Sources: Morris and WatsonMDIMScottsdale Bullion & Coin *A boiler room is filled with sales people who cold call prospects and use high-pressure sales tactics.