Jan
19
How to invest in Gold ?
Filed Under Investing
Auzbee
I am planning to invest some percentage of my savings into Gold.
1. How do I learn more about investing in Gold? What are the sites and procedures to make Gold investments?
2. Should I buy Gold (bars/coins etc) or invest in Gold funds?
3. Typically what percentage of your portfolio would you invest in Gold if you were to?
4. Are there any tax liabilities/exemptions from investing in Gold?
I am planning to invest some percentage of my savings into Gold.
1. How do I learn more about investing in Gold? What are the sites and procedures to make Gold investments?
2. Should I buy Gold (bars/coins etc) or invest in Gold funds?
3. Typically what percentage of your portfolio would you invest in Gold if you were to?
4. Are there any tax liabilities/exemptions from investing in Gold?
Comments
I suggest reading a little history on gold, you’re buying right at the top like in the 80s and you would have lost your shirt. You have to buy when it’s low to make money. If you think the economy is in the dumps, then buy stocks, look back to the 70s. You’re just investing backwards and you will lose all your money, so if you must buy gold because everyone else is, only buy 5% worth. It’s the worst investment historically so don’t ruin your retirement because gold is popular now.
The easiest and least costly way to invest in gold is to buy gold stocks. Transaction costs are the lowest and storage is basically free. But buying gold right now does not seem like a good idea. Why buy now when a few years ago you could have bought for $350 an ounce? Like the poster above said, you’re buying at a top. Any time I see a multitude of ads on TV pushing gold, I know it’s time to get out. I sold my gold shares a little over a month ago. Normally 5-10% of your portfolio in gold is a decent idea as an inflation hedge. But not when it’s run up like it has. I view oil and oil stocks as a better long term inflation hedge. Something over 95% of all the gold ever mined is still out there. In coins, gold bars, jewelry and industrial products where it can be recycled. Every year, more and more gold is mined and very little is lost (some is burried with grandma or grandpa). So every year the supply of gold goes up. But the demand for gold does not always incerase. Oil on the other hand is burned every day to the tune of millions of barrels. Disappears forever. And with China and India being the booming economies they are, the demand is constantly increasing while the supply is disappearing. Buy oil stocks. May favorite is Marathon Oil (MRO). My favorite gold stock (when the right time comes back) is Kinross Gold (KGC). Good luck!
The best and safest way is to invest in an ETF, exchange traded fund (check ishare.com from barclays) following the gold index.
It’s true that gold hasn’t been a great long-term investment, but IMO there’s nothing wrong with putting 5% or so of your portfolio in gold because it IS a very good diversifier. The easiest way to buy gold is to buy the gold ETF, GLD.
As for the tax treatment of gold (and gold ETFs), if you sell within a year, you’ll pay short-term capital gains at your regular income tax rate, just like with stocks. What many people don’t realize, though, is that long-term capital gains (if you sell after holding for more than a year) are taxed at the collectibles rate of 28% (maximum), unlike stocks which have a ceiling of only 15%.
1.As someone who follows commodities along with all other markets, I have learned a lot from the commodities section of bloomberg.com. Remember, while gold has unique properties among commodities, all else equal, commodities tend to outperform during periods of high inflation, i.e. demand for goods that outpaces supply of identical or substitute goods-more currency chasing fewer and fewer goods. If you are interested in trading the commodity, then lind-waldock is one common commodities broker that many people use, but if you are simply interested in synthetically trading gold as you would a stock then you could do that as an ETF, IAU or GLD, with any discount or full service brokerage house. Personally I trade gold on a forex account under the name XAU/USD (NOT to be confused with the XAU-Philadelphia gold/silver index).
2. If you foresaw a major economic crises in which brokers/banks were to fail, then you might consider the hard asset-but then you must take into account the risks and costs of storage. Coins, as with any retail instrument, tend to go at a premium, but the IRS also allows you to purchase US Treasury coins in an Individual Retirement Account, if that is a concern (qualified IRA investments tend to be restricted as you may know). Gold funds can define a wide variety of things-and the ETF’s I mentioned offer a great way to synthetically buy/sell the asset. Many mutual funds that may be known as precious metal or gold funds simply invest in a portfolio of gold/precious metal companies-which will not always track the asset to the tee-in finacial terms, your benchmark error is going to be higher than it would be with an index or ETF.
3. In order to answer this, one would have to know much more. A blogger above answered that commodities are extremely volatile, which is true. If you are simply planning to passively invest in this because you feel that the global economy is still expanding and will be expanding for a long period of time with inflation then enjoy, but make sure you have a valid reason for your views. Maybe you agree if you think that the government of the US will not do anything to support the dollar? Or that China will continue to grow inencumbered even after the Olympics? Remember, markets tend to be efficient over a longer time frame and for every buyer there is a seller who feels opposite of what you do. If you are interested in capital preservation then keep your allocation small-if you are interested in risk or have a trader-like mentality, i.e. not an investor, then you may want to risk more. Be careful.
4.Gold, as with almost any other asset, is taxed as a capital gain/loss on a Schedule D when the asset is sold, so naturally holding for a year or less would subject you to a higher tax rate-short-term, than if you held it for longer than a year-long term.
All of the above topics could have much longer explanations, so if you would like me to clarify anything don’t hesitate to ask. Happy investing.
Buy the fund GLD on the NYSE to participate in the price of gold changing.
Actual physical gold has a lot of costs that go with it (email me if you need examples) People who do this are concerned about revolution destroying the value of money and are not speculating in the price of gold. They can buy coins and bars at any large and most small coin dealers.