Common Gold Buying Mistakes That You Should Avoid
Admired for its beauty and revered for remaining stable even during times of economic uncertainty, gold has always been a go-to investment choice for investors across the globe. After all, while inflation skyrockets and other investment instruments tend to decline, gold often manages to increase in value, outpacing the overall inflation rate itself. This means that owning physical gold can be profitable while also providing you with a sense of financial security when other investments are down. While such advantages make the prospect of purchasing physical gold appealing, there are several major slipups that you may make which could end up ruining the value of your gold investment. Here are the common mistakes that you should avoid when purchasing gold.
Buying too cheap
While plenty of people are aware of the mistake of paying too much for gold, not many realize the dangers of buying gold at a price that sounds too low. As a rule of thumb, the price of physical gold rarely, if ever, falls below spot prices. Should a legitimate dealer decide to sell gold below this price, they will most likely lose money on the sale. After all, they typically need to add small premiums above the spot price in order to make a profit. So if ever you come across gold that's being sold at an abnormally cheap price, be wary — if it sounds too good to be true, it probably is.
Buying too much
When it comes to prudent investing, diversification is key. Unfortunately, not all investors realize this, with many overinvesting in a single asset in an attempt to get rich quickly. Many scammers are aware of this rash behavior and will act fast to prey on the weakness of their potential targets. According to TV stock market pundit Jim Cramer, gold should comprise no more than 10 percent of any investment portfolio. In addition, make sure to only purchase gold from reputable dealers and to do any background checks before your wallet leaves your pocket.
Stocking up on rare coins
Are you a rare coin enthusiast who understands the ins and outs of the market? In that case, rare coins may prove to be a lucrative investment. If you don't possess this specialized knowledge, however, then it may not be a good idea to buy these coins in bulk as they are often harder to value and, therefore, harder to sell. There are, however, well-known government-issued gold coins that you can invest in, such as American Eagles. By choosing these widely-known coins instead, you'll be in possession of an asset that you can easily resell through an array of legitimate coin dealers.
Blindly purchasing physical gold
Don't get us wrong — physical gold can be a promising investment; it just happens to come with some hassles. These include transporting and finding storage for your gold and, most likely, having to pay storage fees if you lack space in your home. Instead of worrying about logistics and the costs that come with it, consider investing in gold futures or ETFs. This way, you'll be able to benefit from some of the financial gains made by gold without having to transport, store, and eventually, sell the gold yourself.