Table of Contents
All successful investments typically begin with an investment plan. If you’re interested in buying into precious metals, you’ll need to start with a gold investment plan to strategize your portfolio. Read on to learn how gold investment plans work, plus the key considerations they include, so you can begin creating your own.
What Is a Gold Investment Plan?
Investing in any asset is a financial risk, so an investment plan outlines your strategy as a means of reducing that risk. A gold investment plan involves strategizing how you’ll allocate your portfolio, determining when you’ll assess performance to consider trading, and defining what your short and long-term goals are.
Rather than purchasing gold blindly, you develop a well-thought-out plan first to guide each step you take toward your ultimate financial goals.
How Does Gold Serve as a Valuable Investment Option?
Gold is a unique asset class. Unlike stocks or other commodities you might think of when you hear the word “investment,” gold is a tangible item with centuries of rich, secure value. Gold serves as a valuable investment option for the following reasons:
- Gold can hedge against inflation or stock market volatility.
- Precious metals provide stable portfolio diversification.
- The market has historically considered gold to be a “safe-haven” asset.
- Gold offers high liquidity despite its tangibility, meaning it’s easy to trade.
- Investing in a physical asset removes numerous counterparty risks.
- Gold provides higher returns during economic lulls, offering a monetary safeguard to investors.
- Gold offers broad investment options, depending on your preferences.
Gold Investment Plan Options
The first step in any investment plan is choosing an asset. You can invest in gold in many ways, depending on your risk preferences, financial goals, and general market knowledge:
Physical gold, or bullion, is the purest way you can invest in the commodity. While physical gold may offer lower risks than the options below, it comes with complex storage requirements and higher vaulting fees. You can purchase bullion as gold coins, bars, and jewelry, with some options available for gold IRA funding.
Gold coins typically come in one-troy-ounce weights, offering easier exposure to gold with lower buy-ins than heavy bars. You can invest in rare or collectible coins or common mints with high purities. At Oxford Gold Group, we offer a range of IRA-eligible gold coins.
Gold bars often weigh around 400 ounces, so they can cost well into the thousands. Investors often purchase bars when they want the most ounces at the lowest price since gold bars offer the lowest premiums. At Oxford Gold Group, we offer 1- and 10-ounce gold bars.
Gold jewelry is a simple, beginner-friendly way to invest in gold, as it doesn’t require as complex of vaulting needs. However, jewelry often comes with high premiums relating to the product’s finish, which can make resale challenging.
Gold exchange-traded funds (ETFs) and mutual funds allow you to invest in shares of an account that purchases funds on your behalf. The shares will track the price of gold.
Essentially, you can invest in gold without the complex vaulting hassles or liquidity bottlenecks. Gold ETFs can come with additional counterparty risks since you do not hold the physical asset. You will also likely need to pay account management fees.
Gold Mining Stocks
Gold mining stocks represent shares in precious metal mining companies, so you can buy into the gold market without purchasing physical gold. Of all gold investment options, mining stocks typically come with the highest risks and, in some cases, the highest potential for rewards when a company succeeds.
Futures and Options
Gold futures are simply contracts you create to purchase or sell gold at a set point in the future. Options are also contracts with either futures or physical gold as their underlying asset.
Creating a Gold Investment Plan
Now that you understand your different gold investment options, we can dive into strategic considerations. The key factors you should think about when creating your gold investment plan include the following:
Setting Target Allocation for Gold in the Portfolio
Your investment portfolio may involve numerous asset classes. Gold might just be one of many things you’re investing in. You may even decide to invest in multiple types of gold.
Regardless of the scenario, you will need to allocate how much of your portfolio you wish to invest in gold. For example, you may decide to invest 40% of your investment funds in bullion, 20% in mining stocks, and 40% in non-gold-related assets.
Regular Monitoring and Rebalancing
After determining how you’ll allocate your portfolio, it’s time to develop a plan for monitoring and rebalancing. Say you initially wanted to invest 20% of your funds in mining shares: What happens if that company fails? You need a consistent schedule for monitoring the market and moving items around accordingly for success.
Long-Term vs. Short-Term Investment Strategies
Finally, you need to think about why you’re investing in gold: What’s your goal? Do you want to earn big right now, or do you want to slowly grow your savings over time?
Short-term versus long-term gold investing will require different strategies. The short-term game often requires much more market knowledge and comfort in risk-taking.
We recommend discussing all of the above considerations with your financial advisor. This guide is an educational tool, but if you need investment advice aligned with your individual goals, seek support from your financial advisor.
Factors To Consider When Evaluating Gold Investments
One of the key considerations when developing your gold investment plan is determining your monitoring and evaluation strategy. Evaluating gold investments involves numerous factors, including the following:
Current Market Conditions
The market influences how all forms of gold perform. Typically, gold has an inverse relationship with other marketplace commodities. For example, when stocks or U.S. dollar prices fall, gold rises because investors move their assets over to the “safe-haven” commodity.
Learning how to evaluate and even predict market conditions can help you better manage your gold investment plan.
Gold Price Trends and Analysis
Gold has centuries of data proving how it performs in different economic periods. Analyzing this data allows you to make informed decisions based on the current economic landscape.
For example, you can view data from the 2008 Great Recession and see how gold spiked in price. If we approach another recession, it wouldn’t be unreasonable to assume the same may happen again.
Economic Indicators and Geopolitical Factors
Gold prices fluctuate with economic indicators, as mentioned above, and geopolitical factors. The precious metal gains its demand from numerous complex sources around the globe, so when tensions tighten overseas, prices may rise or fall. The same goes when geopolitical factors affect mining outputs.
Is There a Minimum Investment Required for a Gold Investment Plan?
Gold investment plans do not have minimum requirements. You can start investing in gold at any level you please, depending on your financial goals.
With that in mind, you should consider the expense of gold. One ounce of gold typically costs around $1,800 to $1,900.
The minimum investment amounts you’ll face will depend on any accounts you choose to open. For example, gold IRAs often have $5,000 minimums to protect your long-term yields, while ETFs typically have one-gram investment minimums.
What Are the Benefits of a Gold Investment Plan?
A gold investment plan allows you to align your buying strategy with your financial goals. In doing so, you can minimize risks and, hopefully, maximize returns. Gold investment plans offer the following benefits:
- Portfolio allocation planning
- Short- and long-term budgeting
- Risk aversion with regular monitoring and rebalancing
- Simpler tax and retirement planning
Are There Any Risks Associated With a Gold Investment Plan?
The gold investment plan itself does not have inherent risks. Creating a plan can remove some of the risks that come with investing in gold. The primary risks of investing in gold include the following:
- Counterparty risks (with non-physical assets like ETFs or mining stocks)
- Market-related risks
- Storage fees
The only time your gold investment plan itself can become a risk is when you assume it will do the work for you. Gold, like any other asset you invest in, requires monitoring for optimal performance.
Common Mistakes to Avoid in Gold Investing
Once you’ve created your gold investment plan and you’re ready to buy, avoid these common mistakes:
- Buying commodities with exceptionally high premiums above the spot price
- Buying during peak market periods
- Purchasing gold coins without understanding their value
- Creating a short-term investment strategy without understanding the risks
- Purchasing gold ETFs without any market knowledge
- Storing your gold at home without the right security measures
Is a Gold Investment Plan Suitable for Everyone?
A gold investment plan may not be suitable for everyone, though it’s likely suitable for any investor who is considering purchasing gold, as it can help align buying strategies with financial goals.
At Oxford Gold Group, we offer gold IRAs with simple storage options, easy buyback programs, and more to make investing in gold a convenient process. Call Oxford Gold Group today at (855) 634-1212 to learn more about our gold IRAs.