When it comes to investing in gold, you have two options, one is gold stocks and the other is gold ingots. For someone unversed, both can seem similar in the beginning. However, they are not.
If you decide to invest in gold stocks, you are betting on the price of gold, whereas, when you are buying physical gold like Canadian bullion, you are betting on the inherent value of the precious metal. There is a big difference between the two.
For someone inexperienced or new to the investing world, it can be difficult for them to make a choice. If that is what troubles you, then you are in the right place. In this post, we will look into some specifics that will help you to make the right decision.
What are the Gold Stocks?
The first thing you need to know about gold stocks is that it comes from gold companies. Buying gold stocks means you are purchasing a stake in a company. This is similar to buying a stake in other companies like Apple, Microsoft, Google, etc.
When the gold company is in profits, the price of gold goes up. But when the company is running in losses, then the value of gold tends to decrease.
Companies offering gold stocks are primarily gold mining companies. They are involved in drilling, exploring, refining, and financing gold.
Gold companies are just like any other company. They get affected by negative publicity downturns and can even file for bankruptcy. This makes gold stocks more volatile than the rate of gold itself.
One of the many advantages of investing in gold stocks is that you could buy shares at a lower rate and sell them when the rates are higher. This will help you make good profits. Not just that, but investing in gold stocks is easy too. All you have to do is open a broker platform and look for gold mining companies or gold ETF and buy their shares.
One fine example of a gold ETF would be the SPDR Gold Shares. This is one of the oldest gold ETFs you will find. You can invest in these shares any time you feel is right.
When investing in gold stocks, you need to keep both external and internal factors of the company in mind. Internal factors include skills of the gold mining company, cultural management, and staff turnover.
On the other hand, external factors include the current state of the economy, political factors, and environmental factors. When you are buying gold stocks of a company, you are investing in the success of their business.
What are Gold Ingots?
Now that you know what gold stocks are, let’s look into gold ingots. By gold ingots, we mean physical gold or the precious yellow metal itself.
Gold ingots or bullion usually comes in the form of gold coins or bars. For example, Canadian bullion. For those who don’t have any idea, gold ingots are regulated by LBMA or the London Bullion Market Association. Also, it should contain 99.5% pure gold.
Gold ingots that are available bars weigh around 13 to 11 kg, whereas gold coins weigh around 31 grams. The good thing about gold ingots is that they are VAT free. You only need to pay capital gains tax on your gains.
When buying physical gold, there are a few important things you need to keep in mind. The first and the most important thing is to buy your gold from a trusted and reputed gold dealer, who is listed by the World Gold Council.
Secondly, you need to look for the right place to store the gold you buy. You can find many retailers who would offer you to store your gold for free. If you are not satisfied with that then you can store them in a different storage facility.
Another important thing to keep in mind is the transaction and insurance fees. It is very important to know the entire gold buying process so that you can decide how much gold ingots you should buy.
One of the main advantages of buying Canadian bullion or gold ingots is that you are investing in the inherent value of gold. The value of gold has always been high. It makes a great investment to hold assets in international banks, diversify your portfolio, and to hedge against inflation. Gold stocks are electronic book-entry but physical gold happens to be the real deal.
Which One Should You Invest In?
Gold investment is based on your objectives. For instance, if you are investing in gold bars, then you want to preserve wealth and diversify your portfolio. But if you are buying gold stocks, you want to earn higher returns.
One of the main benefits of investing in gold ingots is that you can have complete control over what you own. It cannot be influenced by any bank, CEO, or politicians. Also, you don’t have to get involved in the troubles of stock markets.
However, if you decide to buy gold stocks, you can higher profits when the conditions are favourable. During a downturn, you can buy gold stocks of a company as the prices of the share goes down. Once you buy shares at a lower price, you can potentially sell them at a higher rate when the time comes. When buying gold stocks, you are investing in the gold mining company which means you are still linked with a banking system, financial collapse, and low-interest rates.
As an investor, you should have gold in your portfolio. If you are unable to decide between gold stocks and gold ingots, then you can buy both. After all, you will get benefits from both.