6 Common Gold Investment Errors and How to Avoid Them

6 Common Gold Investment Errors and How to Avoid Them

Jan 28, 2022, 4:45:31 AM Business

According to some research, 10.8% of the American population owns gold.

Do you want to be part of that number? If you're thinking about investing in gold, you are probably wondering what you need to know before you start investing to make sure that it's a success! 

To start, you should learn about common gold investment errors and how you can avoid them.

Thankfully, we have some tips for you to keep in mind, so make sure you keep reading to develop the best gold investment strategy.

1. Not Knowing Why You're Investing

First, you should come up with a goal for why you're investing in gold. You might be worrying that the economy will crash and gold will be the only valuable thing left. Or maybe you're worried that the dollar will corrode.

Both of those reasons are good goals to get you started in investing in gold, but they don't really work with each other.

Before you invest in gold, figure out which position you are invested in the most. If you want to diversify your portfolio, this is a great reason to invest. 

If you are worried about the erosion of currency, then you should be putting more of your investments into gold rather than stocks.

2. Not Asking If They'll Buy It Back

When you buy gold from someone, you should always ask them if they're going to buy it back when you're ready to sell.

If they say no, make sure you leave and find a new dealer. If a dealer doesn't want to buy their gold back, that might mean a few things. They might not value the metals, or they might be embarrassed between what they're selling it for and what it actually costs.

Normally, they would be charging you too much for their gold, and they don't want you to realize how much they're charging you for it. 

Regardless of whatever excuse they give you, it likely means that they're overcharging you. Just go and find a new dealer.

3. Not Investing Long-Term

A lot of beginners invest in metals like it's a speculative asset. They have expectations that are unrealistic, and they think that their gold will earn a lot of money in the short term.

This might make the investors overconfident and cause them to make errors in their portfolio, like selling or buying too often. 

While gold became really expensive and valuable between 2007 and 2011, many investors assumed that they would be able to experience the same reward and growth. 

However, this isn't true. Precious metals are always going to be a long-term investment, and you should use them as a security investment if everything else goes wrong. 

Gold is normally a good return on investment for a strategic retirement portfolio.

4. Worrying About Confiscation

While President Roosevelt did make it illegal to old gold in 1933, it likely won't happen again in the future. In 1975, it was still illegal for Americans to own gold, but there are loopholes.

For example, one loophole was that citizens could hold collectible rare coins or limited things that were made of gold. This was a way for citizens to legally own gold, but some people were worried that it would be confiscated. 

Many people will say that it happened once and that it could happen again, but this likely won't happen. Normally, other people will try to use this to scare you into paying more for gold based on fear. 

One of the reasons that the US made gold illegal for citizens to own was that it was discrediting the dollar. You could pay $20 and get twenty ounces of gold in return. 

However, that isn't the case now since they're not convertible. This happened back in 1971. So now, there's no reason for the government to take it from you.

So don't let anyone talk you into paying more for gold based on the fear of this happening.

5. Not Acknowledging Charges

Some metal investors might be excited about buying gold, but you should still be smart and make good judgments.

Even though it's gold, you should try and treat it just like any other investment that you would make. Makes sure that you know if there are any premiums or extra charges with buying gold. 

There are likely fees to get this, so you'll need to factor this into your projected net gain that you'll get from the gold. 

Do research on standard fees and premiums, and make sure you shop around to get an idea of what the standards are. That way, you'll know if someone is charging too much and trying to scam you.

6. Not Understanding Diversification

While diversifying your portfolio is important, make sure that you really know all the standards about diversifying it. 

Some investors think that if the stock market goes down, the price of gold will go up. But that isn't the case; they aren't directly correlated. 

However, there is a traditional inflation hedge attached to gold. But sometimes, when inflation in the economy decreases, the price of gold goes up. But you can't always rely on it. 

Gold can rise in either a bear or a bull market, and it can rise in decreasing or increasing inflation. So investors shouldn't count on gold in that way when they're diversifying their portfolio. 

Investors should view it as another source of potential revenue. You should try and buy gold when it's underperforming so that you can likely have a bigger return when it goes back up. 

If you're interested in learning more about investing in gold, you should also check out this article: https://www.raremetalblog.com/24-interesting-facts-about-gold/.

Discover More Common Gold Investment Errors

These are only a few of the most common gold investment errors that people make, so if you avoid these, you should be on the right path.

However, there are always going to be investment risks and rewards. Talk to a financial advisor if you're not sure about an investment.

Explore our website to find even more articles with financial advice. 



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