Gold is considered to be one of the most stable investments one can make. In 2020 alone, the price of gold rose 24.43%.
Although massive jumps like this
don't happen every year, gold is a great long-term investment. Since gold often
withstands inflation, stock market crashes, and recessions, it's seen as a
pretty safe investment.
However, that doesn't mean you
should just buy the first gold bar you see and call it a day. There are still
plenty of mistakes in gold investments you might make. Read on to
learn what the most common errors are and how you can avoid them.
The
Top 6 Mistakes in Gold Investments
As you develop your gold
investment strategy, it's wise to consider these aspects of the gold market.
Building your precious metal portfolio carefully will only help you in the long
run. Although investing in gold is hardly a get-rich-quick scheme, it's a smart
investment within a diversified long-term portfolio.
Mistake
#1: Buying Gold During the Growing Demand
As with any investment, the most
opportune time to buy gold is when demand is low. Since gold isn't going
anywhere, there's no need to rush. Take your time and buy when the time is
right.
If it seems like everyone is buying
gold right now, don't jump on the bandwagon. Buying when demand is high can
reduce your return on investment and even hinder inflation risk hedging.
Instead, check trends
in the gold market to be sure you're investing when demand is low.
Mistake
#2: Not Understanding Why You're Investing in Gold
There are many reasons to invest in
gold, and it's important to know what yours are. As an investor, you're likely
hoping to diversify your portfolio (perhaps in fear of an economic downturn).
This means you'll want to take a different approach than, say, a market
speculator.
Mistake
#3: Ignoring Spot Price
Whether you're buying or selling
gold, it's essential that you check the spot price. If you're an inexperienced
investor, this might be a new term. It simply refers to the current price of
gold.
To ensure you're buying from a
reputable source, make sure the selling price isn't too much higher than the
spot price. Otherwise, you may have difficulty seeing a profit.
Mistake
#4: Buying "Dark" Coins
"Dark" coins are those
sold from an unverified source. With these, you run the risk of overpaying or
buying fake gold. For advice on how to avoid these scams, check
out reputable gold company Noble Gold at https://www.raremetalblog.com/noble-gold/.
Mistake
#5: Not Diversifying Your Portfolio
Investing only in gold
is also unwise. Gold should be part of a well-diversified portfolio, rather
than your only investment. If you've ever heard the saying, "don't put all
your eggs in one basket," that applies here.
Mistake
#6: Not Checking the Reputation and Experience of Your Dealer
Comparing selling price
with spot price is a good place to start when checking the reputability of
your dealer, but it isn't the only factor. Research your dealer
online to confirm their reliability and get a sense of other customers' experiences.
Otherwise, you run the risk of walking into a scam.
Investing
in Gold Wisely
Avoiding these blunders will
have you well on your way to building a portfolio well-diversified with
precious metals.
Now that you know what the biggest mistakes in gold investments are, you're well equipped to spot (and avoid) bad investment advice. For more financial tips, check out our personal finance section.
