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Investing in gold can be a smart way to protect your investment portfolio from losses, hedge against inflation and enjoy reliable returns despite economic uncertainty and market fluctuations. And one of the most straightforward ways to invest in gold is by buying gold bars and coins.
Physical gold is easy to buy, easy to understand and is a tangible asset that can give investors an added sense of security and satisfaction. That said, there are some things to keep in mind to make sure you invest wisely.
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Buying gold bars and coins: Dos and don'ts
To get the most from your investment, follow these guidelines when buying gold bars and coins.
Do buy from a reputable dealer
The first step in buying gold bars and coins is to choose a reputable dealer. You want a dealer with an established track record, a solid reputation and responsive customer service.
Check out online ratings, reviews and feedback from previous customers. Look for dealers who are accredited by organizations like the Numismatic Guaranty Corporation (NGC), Professional Numismatists Guild (PNG) or Accredited Precious Metal Dealers (APMD). These dealers have been vetted and required to meet strict standards and ethical guidelines, so you can rest assured you're dealing with professionals.
Do verify the quality
You should only purchase gold that meets the industry standards for quality. Before you buy a gold bar or coin, evaluate it carefully.
First, check the purity. Gold's purity is measured in karats. The higher the karat, the purer the gold is — and the more it's likely worth. Investment-grade gold is at least 22 karats, but 24 karats is considered the purest form of gold.
Next, verify the authenticity. Check for a hallmark or stamp that indicates who manufactured the gold, and stick to established mints like the U.S. Mint, Royal Canadian Mint and South African Mint. If possible, ask for a certificate of authenticity or a third-party verification service to ensure the gold's quality and value.
Don't pay too much
When buying gold bars and coins, you need to consider the premiums, or the amount you pay above gold's spot price.
Physical gold must be produced, packaged and shipped, which can make it more expensive than other forms of gold investments. That said, the price of a gold bar or coin should be determined by its weight, purity and current gold prices, not manufactured hype. So, be sure to compare multiple dealers' prices and fees to make sure you're getting a fair deal.
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Don't buy too much
Gold can add some much-needed safety and stability to your investment portfolio. However, it won't generate the potentially large returns that riskier investments, such as stocks, might. For this reason, experts recommend keeping no more than 5% to 10% of your portfolio in gold for maximum diversification.
Do store it securely
Once you've bought your gold, it's essential to store it securely to protect it from theft, loss or damage. Depending on how much you have, you can put it either in a fireproof home safe or a safe deposit box at a bank.
Don't forget to insure it
Your homeowners insurance likely won't cover the full amount of your gold investment, and banks typically don't insure safe deposit box contents. Make sure to purchase insurance to cover your gold bars and coins so you aren't out of money should something happen to them.
The bottom line
Investing in gold bars or coins can be a lucrative and rewarding experience if done correctly. Follow the dos and don'ts above to minimize risk and maximize your returns. With the right information and strategies, you can build a solid and profitable investment portfolio.
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