Investing in the shares of companies that extract, refine and trade gold is a much simpler proposition than buying physical gold. Since this means buying stocks from gold mining companies, you can invest using your brokerage account. In the event of a stock market crash or an apocalyptic event in which paper money acquires incalculable value, gold can be used as a currency to trade items. And, since you have physical gold in your possession, you can easily use it to exchange it for the goods you need to survive.
People who choose to invest in gold through options or futures contracts must actively monitor their holds in order to sell, transfer or exercise their options before they expire without any value. While owning gold sounds great and can even be considered responsible during a stock market crash, investing in gold comes with some unique challenges and doesn't always turn out the way you might expect. As you begin your research, you may realize that you have the option of investing in gold stocks or physical gold (bullion). If you buy gold from a non-reputable dealer or on a third-party website, such as eBay, you must ensure that your purchase is accepted in your IRA before buying.
However, keep in mind that gold company stocks are correlated with gold prices, but they are also based on fundamentals related to each company's current profitability and expenses. But while he is clear that he doesn't think investing in gold is a good idea, Smith does recognize the attractiveness of physical metal. When you invest in physical gold, also known as ingots, you actually own gold in the form of bars or coins. Gold certificates are less popular today because the U.S.
dollar is no longer backed by gold, although some places still distribute them. According to the IRS, it's not legal to store your gold IRA in your home; you can't just bury your gold in your backyard or store it safely in a safe. If the stock market crashes, your investment won't be protected because you don't technically hold gold. Pawn shops aren't known for their fair prices, and if you sell your gold to a dealer, you're likely to sell it below the spot price of gold.
Despite its former appeal, gold isn't always the strong investment that movies and television shows may have led you to believe. Investing in gold mutual funds means that you own shares in several gold-related assets, such as many companies that mine or process gold, but you don't own real gold or individual stocks. Some see gold as a hedge against inflation, since the Federal Reserve's actions to stimulate the economy — such as interest rates close to zero — and government spending have caused inflation to rise at full speed. If gold moves against you, you will be forced to contribute significant sums of money to maintain the contract (called margin) or the broker will close the position and you will suffer losses.
Often, the best thing you can do for your portfolio is to follow your investment plan, not rush to buy gold bars.