| Hi Taylor:
Can you explain the whole investing-in-gold thing? So many people
have told me I need to buy gold but no one has told me why. What's
the real incentive there? - Mitch
Hi Mitch: I'd be happy to fill you in on how this works. I think
buying gold and other precious metals is a smart way to put your money
to work, provided you know what you're doing.
Investing in gold can be as simple as buying the physical metal and
storing it in your closet, or as complicated as having shares in different
gold-related companies. How you buy into this commodity depends on
how much you have to invest and how much risk you're comfortable taking
on. Owning gold bullion is the simplest option, but there are a few
ways to go about it.
Before I get to the "how" portion, here's a little info as to why
gold is a good investment. First and foremost, it preserves its wealth
extremely well. People have been using it as a currency since the
dawn of time, and it's held strong throughout. Gold also resists the
inflation that kills paper currencies. While an ounce of gold was
worth about $35 in the 1970s, it's now worth more than $1,200. Meanwhile,
if you have $35 in cash that you've been holding onto since General
Ford was in office, that's worth... $35.
That, in short, is why you see so many pawnshops and other small vendors
advertising that they buy and sell gold. However, there are other
options for anyone who doesn't feel comfortable keeping such a valuable
commodity stashed away in their home. The most popular choice is probably
gold exchange-traded funds, or ETFs. Essentially, this method allows
you to own shares that are physically backed by the material you're
buying; one share is usually equal to one-tenth of an ounce of gold.
Buying these ETFs turns you into a proud gold owner who doesn't have
to bury gold bricks in the backyard.
Another way that some people buy into gold is by investing in actual
gold-mining companies. While this is still effectively a gold investment,
it's a riskier one that requires a lot of extra research. Blindly
buying shares in mining companies isn't a smart practice.
I believe investing in precious metals is a great way to diversify.
You shouldn't turn all your holdings into shares of gold, but it's
worth diverting a portion of your funds to this market. If you decide
to go this route, make sure you buy from a credible source. As long
as you're getting a fair deal on a good product, you should be able
to grow your wealth. Go for gold!
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.