Not buying gold is now out of the question (in my humble opinion), but how do you actually do it?
Paper gold is a loose term for indirectly buying gold on the stock market via shares in an ETF, for example.
You don’t physically own any precious metal and the asset you hold is not backed by any gold.
The shares you buy bases its value off the price of gold.
If the price of gold goes up, so does your stock price; however, if the price of gold falls then your asset will also decrease in value.
It is more liquid – meaning that it is easier/quicker to buy and sell your asset if you need to extract the cash.
No storage costs – because you do not own any physical gold, you don’t need to pay any fees on storing it in a vault.
Hassle free – some people choose to keep their gold in their homes and that brings with it insurance costs, installation and safe storage.
Accessibility – if you don’t have much capital or not enough to buy a whole ounce or bullion of gold then you can buy shares in gold instead, which are usually more affordable.
That way you can still gain exposure without breaking the bank!
You do not own any physical gold. The End.
Gold is seen as a safe haven asset so even if the price drops, people seek comfort in the fact that they still own ‘hard money’.
Hard money is a reference I made in my previous blog post – GOLD – so check it out if you want to understand what makes paper money fiat currency and gold real money.
See the arguments of for and against above – if you hold physical gold the arguments are in reverse.
You own hard money so if the sky collapses you can fall back on an asset that has withstood the test of time. 5,000 years in fact.
Storage fees – it will cost you a monthly fee to hold your gold in a company’s vault.
3rd party risk – you are trusting your gold to be held safely with someone else.
Home safe installation – liable for damages or theft.
So which one do you go for?
My general motto in life is to diversify, diversify, diversify.
Buy some physical gold, some paper gold (for liquidity purposes) and even some gold mining stocks.
For the latter, this requires a lot of research and company analysis so I wouldn’t recommend this for a rookie investor (like myself).
Gold mining stocks can give rise to greater returns but, of course, that comes at a price of greater risk.
How to buy physical gold
If you are in the US, I would recommend you check out Mike Maloney and his “Gold Silver” website for more information about what products to buy, the history of money and storage options.
I do not live in the US so have no affiliate ties with his website…sadly ;p
For your own country, I would google websites of the 3 most popular gold bullion companies and then go on trust pilot to see their reviews.
Give them a call and ask them the following questions to get a good grasp of what they are about.
You can then directly compare them against each other:
“Are you allowed to recommend products? If not, are you allowed to disclose which products that you sell are most popular amongst your investors?”
“Whichever products I buy; can I sell them back to you?”
“Roughly how long does it take to sell items back to you?”
“How do you value the gold price?”
“Can you explain to me the difference between spot and premium price?”
“What are your storage fees?”
“Do you have insurance that covers both storage and delivery of my items up to the full cost?”
“What is your shipping/delivery fee?”
“In what form does my proof of ownership come in?”
“How quickly can I access my gold if I want to visit your vault? How much warning do you need?”
I cannot recommend what products to buy because this is changing all the time and will no doubt be out of date in a few weeks/months’ time.
Look into this hard asset, as it is certainly worth owning some (however small).
Research the top 3 most popular gold bullion companies in your area.
Give them a call following the list of questions above.
Only one way to find out…stay tuned!
There is the equivalent of 8 teaspoons of sugar in a sweet potato. Shocker.