The most direct way to own gold is to buy physical gold bars or coins, but these can be illiquid and must be stored securely. ETFs and mutual funds that track the price of gold are also popular, and if you have access to derivatives markets in your brokerage account, you can also use futures and gold options. Investing in gold stocks, ETFs, or mutual funds is often the best way to expose yourself to gold in your portfolio. Founded in 1976, Bankrate has a long history of helping people make smart financial decisions.
We have maintained this reputation for more than four decades by demystifying the financial decision-making process and giving people confidence in the following actions. Gold futures are a good way to speculate on the rise (or fall) in the price of gold, and you could even receive physical delivery of gold, if you want, although physical delivery is not what motivates speculators. The biggest advantage of using futures to invest in gold is the immense amount of leverage you can use. In other words, you can own many gold futures for a relatively small sum of money.
If gold futures move in the direction you think, you can earn a lot of money very quickly. Of all the forms of investing in gold, the riskiest is trading futures or options contracts, a form of speculative investment. Futures and options are derivatives, meaning that their value is based entirely on the price of an underlying asset. Gold exchange-traded funds (ETFs) and mutual funds are accounts that buy gold on behalf of an investor.
Each of the shares that make up these funds represents a fixed amount of gold and can be bought and sold as shares. This is one of the best ways to invest in gold, as ETFs and mutual funds allow investors to work with gold, without having to deal with the costs of physical property (such as securities or gold insurance). There are fees associated with buying and selling gold through ETFs or mutual funds, but they are often much lower compared to managing other assets. You can buy physical gold from retailers such as JM Bullion and APMEX, as well as from pawnshops and jewelry shops.
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