If you're looking for ways to diversify your investment portfolio, you've probably come to think about Gold.
This precious metal, which has been valued for thousands of years, has always fascinated people. The fact that it is possible to hold real Gold, in contrast to the majority of today's fiat currencies like British pounds, American dollars, or euros (as they mostly help with online bank accounts), brings comfort to investors. Moreover, Gold is often seen as a hedge against inflation, as a safe haven asset in times of high uncertainty and market volatility, and as a great way to preserve investors' wealth over time.
But if you're considering adding Gold to your portfolio, you might also be wondering what's best between physical Gold and paper Gold. Let's have a look at what advantages each option can provide you, so then you can decide which one is the best solution for you and your strategy!
What's the difference between physical Gold and paper Gold?
While physical Gold can be bought and held in a material and tangible form that can be stored, such as Gold bars, coins, and jewelry, paper Gold doesn't allow you to physically touch or own Gold, as it represents more of an indirect investment form through financial products tracking Gold prices.
Usually, physical Gold is sought after by investors looking for a way to diversify their investments by being able to hold safe-haven assets that they can have access to and sell during rough times. It is also a better option for those looking to keep Gold for a long time to profit from its price appreciation over time.
On the other hand, paper Gold is a preferred solution for more active traders and investors looking for ways to profit from the price fluctuation of the precious metal without having to deal with physical Gold. In that case, the investment horizon is usually shorter than the one planned with physical Gold.
Why should you invest in physical Gold?
First of all, physical Gold is a way to invest in something without having knowledge of how the stock market or trading works. You can go to any reliable and popular direct seller or online site or dealer to get Gold in any form you'd like. Because the entry barriers are so low in terms of access, this investment vehicle is extremely popular for those without any financial knowledge.
Secondly, physical Gold is the ideal option if you're looking to invest in a tangible asset in the long run. Overall, Gold's value has appreciated over time, and its value cannot be manipulated by central banks like fiat money can, for instance. Moreover, it is a great option if you're looking for an asset that can easily be given as a gift to your family.
Why should you invest in paper Gold?
Paper Gold is a better option if you're looking for a way to profit from short- to medium-term Gold price swings without having to deal with storage costs, as paper Gold is associated with a digital form of investment.
It is also a great option to invest indirectly in Gold through very liquid financial products that can sometimes be accessible with a relatively small amount of trading capital, so anyone can invest in Gold regardless of the size of their investment. Moreover, there are a range of financial products you can use, including derivatives that allow investors to profit from the fall of Gold prices as well as from the rise of its price.
How do you invest in physical Gold?
Investing in physical Gold is quite easy, as you just need to find a trustworthy Gold seller, like a jeweler or a bank, to buy Gold in the form you prefer. Remember that it's always best to get a certificate of authenticity.
How do you invest in paper Gold?
If you want to invest in paper Gold, there are different kinds of financial products you can use. You'll just need to make sure you're choosing the right one for you, your trading strategy and your financial goals among the ones available, like ETC (exchange-traded commodities), ETF (exchange-traded funds), CFD (contracts for difference), Turbos, Futures, and Options, among others.
Physical Gold vs. Paper Gold: What's Best?
Well, there is no real right answer to this question, as both options have their own advantages and risks, which means that what might be a great fit for some might not be the best option for others. It mostly depends on your time horizon, your financial objectives, your risk appetite, and your investment capital.
Physical Gold is a better option for those looking to invest over the long term and profit from a tangible asset, but it also means you'll need to find a secure way of storing it, which might be costly. In addition, it is sometimes difficult to buy physical Gold in the best conditions (fraud risk, difficulty ensuring the quality of the Gold you're buying, etc.), not to mention that there is sometimes a significant difference between the price of the physical Gold you're buying and its real value (premium), depending on the form of Gold, the buying conditions, etc.
Paper Gold is often a better solution for those looking for an easy way to benefit from short- to medium-term price movements in Gold without having to buy physical Gold. However, financial products that track Gold are often volatile and often require that you have sound knowledge of trading. You will also have to face the risk of capital loss, depending on how risky the financial products used are.
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