Gold is an investment market that has been around for centuries. A few hundred years ago, gold was the standard currency between nations, and your wealth was defined by how much gold and land you owned. These days, the real estate market definitely proves that land isn’t what it used to be, but gold has remained strong as one of the most popular investment opportunities anyone can make. Gold investment for beginners is all about understanding how the market works and how to start investing.
The best advice for gold investing for the novice is dollar cost averaging. This is a method of averaging your risks so that if gold happens to fall in price during a particular quarter you aren’t taking such a big hit. To work with dollar cost averaging, you need to put the same amount into gold every single month, regardless of where the price is at. What this does is spreads the risk over a longer time period so that if it should drop suddenly for any reason you are still likely to make a profit on some of your investment.
Let’s say you bought gold the first month at $900, the second month at $1,000, and the third month at $1,400, but the fourth month it drops down to $1,150. If you had put all of your money into gold while it was at $1,400, you would have taken a considerable hit. By averaging out your costs though you’re still in the green until gold drops lower than the average of all your investments. To figure out your average investment, add up all the prices at which you purchased gold and then divide by the number of occurrences. In this scenario, your average investment would be $1,100, so any price above that gives you a profit if you were to sell.
The longer you do this, the more steady your investment will become. So how much should you put in? Investment managers usually recommend between 5 and 10 percent of monthly earnings when it comes to gold investment for beginners. Once you start to get an idea of how the market works and what factors influence the price of gold, you can adjust your monthly investment as you see fit. It’s important though to make sure you don’t start wildly fluctuating your investment with each passing month. If you don’t stay reasonably reliable in your monthly investment, you aren’t practicing dollar cost averaging anymore.
Once you have that basic strategy in your head, the next question that most beginners ask about with gold investing is how to invest in gold. There are two ways to do this: gold bullion and gold stocks. With bullion, your investment is solid; it’s in your hand, and you can choose when to sell and how much you want to sell. Most investors purchase either gold bars, gold coins, or gold jewelry, all of which work I basically the same way.
There is not much to gold investing for the novice, and once you understand the basics of how to make your money work for you, you can start to make a real profit investing in gold.
More related articles: