How to invest in gold for beginners?

For Centuries Gold is considered as an important asset that can be preserved and utilized during Economic crises caused during wars or during inflation caused by any pandemic. Even during the Covid 19 pandemic, gold has maintained its high value. 

Once upon a time gold was not just a commodity but a currency in itself. The currency notes and currency coins we use today have their roots in gold. Currency was printed based on the gold reserves and they were not allowed to print more than their gold reserve deposits. There is a greater relationship between currency and gold since many generations. 

Today, gold is a precious metal that is traded as investment and used in jewellery. Here are few basic guidelines that can help you to invest in Gold without any confusion.

Ways to invest in Gold for beginners

1. Buy gold coins or bullion

The most significant and straightforward way of investing in gold is through buying gold coins or bullion. You can go to a bank or to a retailer for purchasing gold coins, bullion or even gold bars depending on how much bigger your investment plan is done.  

Pro- When you buy physical gold, the increase and decrease in the financial market will not have any influence on your gold investment. 

Con- By purchasing gold in its physical form you should also be making arrangements towards keeping gold in a secure location, Bank lockers or your personal lockers are the most preferred locations where you can store your gold. However there is a maintenance fee for a bank locker. Having an insurance components expense will also add to your maintenance of gold expense. 

2. Gold Mutual funds

Like debt mutual funds and equity mutual funds there is also similar like of mutual funds called gold mutual funds. The investments in gold mutual funds are done through mining, manufacturing or its related companies. The investments made will go into a large pool and you get a contribution of earning from the pool of funds. 

Pro- This is a kind of mutual fund investment where you do not get any exposure to the physical gold but you will still invest in the gold. 

Con- There is a transaction fee and commission charges that will reduce your earnings from the investments.

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3. Exchange traded funds (ETFs)

Investment through the exchange traded funds is an interesting way of gold investment. Exchange traded funds will track changes in the gold prices and trades through the regular stock exchange indices. Exchange traded funds own the gold which divides gold ownership into fragments of shares and then sells those shares into stock markets.

Pro- You will not be required to have a large amount of money to buy gold. There is very little risk associated with the theft or storage of gold. Gold Exchange traded funds are quickly sold in the stock market as they are more transparent and clear. 

Con- Just like mutual funds, even exchange traded funds have management fees and commission charges. The profits that you earn will be lesser than the actual physical gold price investment.

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4. Gold Options and Futures

Gold Options and Futures are more complicated than other three investment alternatives. Options and futures are part of greater investment instruments which are known as derivatives. Speculations can be made in the derivatives market on future gold prices. This speculation will make you enter into an agreement with another party to sell or purchase on a specific date for a specific amount of money. If the gold price moves in the direction as of a specified date then you make good money if not you will lose your money. 

Pro- The capital investment amount will be smaller in the beginning stages and has lower transaction costs. 

Con- Derivatives are difficult by nature and they are difficult to understand and operate even for experienced professionals. The investors should know how to predict and make money with the prediction. 

Why should you buy gold?

To better answer this question let’s imagine you have put all your money in the share and thought that gold is not a good investment. Everyone knows what can and will happen to stocks. 

In the year 2008, after the great depression bubble the gold prices have doubled in three years and continued to increase the value. The reason is that the world’s economy has fallen down and investors have largely invested in gold.

During the ongoing Covid 19 crisis, there was a huge fall in the world’s economy. The world’s investors have invested more in the gold market and this is the reason that gold prices during the pandemic have sharply increased. This is the reason that gold is considered one of the safest investments in the world. 

Investment in the gold is a perfect way to diversify the portfolio and also it is a way to increase your profits. It cannot be compared to investments in shares and bonds as they are different forms of investments. 

How much should you invest in gold?

You should not put a large amount of your investments in gold as it is a volatile commodity investment. Experts suggest investing in gold should be less than 10% of the overall portfolio of your stocks. The benefit for new and professional investors can be in diversification that gold can provide you. Periodically keep balancing your portfolio once you have invested to build your position. By investing systematically in this way, your market exposure increases and you can get to know the trends. 

What is the right time to invest in Gold?

The best time to invest in gold is when its prices fall down. A smart investor is one who invests in gold when prices fall and sells gold when prices increase without attaching too much or too little significance to it. When the prices of gold fall the stock prices of gold also fall and vice versa. It means that you can gain by selling gold when the price increases which you have purchased at a lower price. To understand this you must keep an eye on the current gold rate in Dubai along with the history of gold rates in UAE.  

Meet the author
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Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It’s a commercial mortgage banking company. He has a “Doctoral Degree in Commerce” and two master’s degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.



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