With gold prices at an all time high, you might be thinking about jumping on the bandwagon and investing in gold. There are many ways to invest in gold – you can buy physical gold, you can buy gold backed Exchange Traded Funds (ETFs) or you could open a gold investment account.
Here are four things to think about to help you decide which type of gold investment you should make.
1) Who owns the gold?
There are two types of gold ownership – allocated and unallocated. Allocated gold is when you are the owner. Unallocated gold is when the company you’ve invested in owns the gold.
Allocated gold gives you the comfort of knowing the gold belongs to you. However, this usually comes with more fees like storage fees and insurance fees to keep the gold safe. Or if you keep it at home, you’ll probably have to buy a safe to store the gold.
With unallocated gold, you pay less in fees, as you don’t have to pay for storage or insurance, which makes it a cheaper way to invest in gold. But it can be more risky because if the company shuts down, you might lose your investment.
So if you prefer to have the security if knowing your investment is safe, consider using an allocated gold investing method. If you just want to pay less in fees and don’t mind the higher risk, you could consider an unallocated gold investing method.
2) The actual price to buy and sell gold is slightly different from the market price
For example, if the global market price of gold is RM252 per gram, you might have to pay RM254 per gram for it, which is RM2 more than the market price. Or when you sell your gold, you might have to sell at a lower price of RM250 per gram, which is RM2 lower than the market price. So find an investment with the smallest difference to help you save on cost.
3) How liquid is a gold investment?
Liquidity means how quickly you can sell off an investment for cash. Depending on how you invest in gold, it can be easier or more difficult to sell. For example, selling physical gold is more difficult than selling a gold-backed ETF, mainly because with physical gold, you need to find a buyer, and carry your gold with you to make the sale. With ETFs, you can sell your gold investment over an exchange like Bursa Malaysia, just like buying and selling stocks. So, if you’ll need to quickly turn your investment to cash, be sure to pick a more liquid investment.
4) Does it need to be insured?
When you invest with certain companies, they will insure the gold and charge you a fee. But if you buy physical gold, you are responsible for keeping your gold safe. Keeping gold in a locker or under your bed might not be the best strategy to protect your investment from being stolen or from getting damaged. So be sure to check if your gold investment is insured. Otherwise, it may be best to insure it yourself.
Choosing which way you want to invest in gold will depend on factors like your individual needs and risk appetite. These four tips will help you compare the best type of gold investment for you! Read our guide to learn more about investing in gold.