HOW TO Invest in Gold & Silver
We explore how you can invest in gold & silver and the reasons why many experts see gold & silver as an essential investment right now.
This site is aimed at beginner’s who have perhaps not studied much financial information or economics before, or have previously found (like me) that much of the information was way over their heads. I aim to keep it simple, in plain english and still give a balanced overview. This means only including the key points so those of you who wish to know more will find the recommended reading useful. Happy Investing!
There are 4 main ways to invest in gold & silver
1) Hold physical gold & silver bars or coins at home
2) Own physical gold or silver which is stored securely for you under your name
3) Invest in an exchange traded fund (ETF) which mirrors the price of gold or silver
4) Invest in gold stocks (mining company shares)
1) Hold physical gold & silver bars or coins at home
Many people like to have at least a few gold or silver coins at home for easy accessibility.
If you wish to have a large amount of gold or silver at home you will need a vault & to pay insurance and transport costs which can all stack up. You also need to ensure you buy your gold from a trusted source to ensure it is of a good quality. It will be harder to sell on again since the next buyer will also want to ensure it is pure.
There are many online retailers that sell gold & silver coins and bars. However a simpler way for a beginner to own physical gold & silver is :
2) Own physical gold or silver which is stored securely on your behalf, under your name
For a beginner, this is a safe, straight forward way to owning gold & silver.
There are two companies I would recommend from personal experience for this. Both store your metal in secure vaults for you under your name for a small monthly storage charge.
The main difference between the two companies is the purchase & sell price of gold and silver & the methods you can use to buy or sell.
Bullionvault allows you to store physical gold & silver in 3 countries - London, New York & Zurich. You may enter a price that you wish to buy or sell gold or silver at on their system and the system will follow those instructions (as long as the price reaches your instruction). This is very useful if you are not able to watch the prices often. As Bullionvault offers a free gram of gold or silver when you sign up for an account, you have a great way to test Bullionvault before investing your own money. For your free gram and to open an account - On the right of the Bullionvault homepage - click on the silver picture to open a silver account or click next just above this logo until you find free gold. Alternatively click HELP - the third button top left, get me started now
Bullionvault also has some useful live gold & silver charts in different currencies.
Goldmoney is another recommended company for storage of gold and silver.
These first methods of storage are mainly for security (although since we think the value of gold & silver will go up you will make capital gains too but that is not the primary aim). With these you personally own the physical metals. Most in the know agree that you should own at least a little gold or silver in this way.
3) Invest in an exchange traded fund (ETF) which mirrors the price of gold or silver
The third method can be used to maintain your purchasing power. In fact many people keep their money invested in gold or silver ETFs instead of a bank. Mainly because at the moment banks are paying virtually no interest, meanwhile inflation is reducing your buying power by around 5% officially but maybe even more. That equates to an interest rate of -5%!! ETF’s are very liquid so you can easily sell the ETF to get at your money when you need it. The only risk is that there could be a short term (while the trend for gold & silver is up) gold or silver price drop – this is generally more of a concern if you have only just bought into the ETF.
ETFs can also be used as a means of making Capital Gains. The most important consideration here is that you need to decide a strategy to do this (see Fundamentals of Investing). Most advantagously this capital gains will be TAX FREE if your ETFs are held in a Shares ISA
To invest in an ETF you need to open either a dealing or ISA account with an online broker. Through this broker you can then buy or sell shares in an ETF.
The broker who I use is Selftrade and I am very pleased with their service. I have both an ISA and a dealing account with them. As well as a SIPP (Self Invested Personal Pension). There is an annual administration fee of around £45 which covers all three accounts. Then everytime I buy or sell shares in my ETF there is a £12.50 fee – regardless of how many shares I buy or sell (as long as they are all for the same ETF). All transactions can be carried out online or by phone. (Be aware that some stockbrokers charge more of a fee if you buy or sell by phone)
If you wish to receive £50 FREE when you open a selftrade account please email me selftradeoffer@investing4beginners.co.uk & I will send you an invite
More information about ISAs, trading etc can be found on Selftrade's website, under getting started
There are many gold and silver ETFs available – but the ones I prefer are:
PHAU – Gold ETF backed by physical gold that is allocated to you but stored where the ETF is administered. This ETF tracks the gold price pretty much exactly (it is always slightly less because of storage costs and charges) From research I have noticed that if you held this ETF for a year or more and the gold price did not change, your ETF would hold its value – A good store of wealth longer term.
PHAG- The silver equivalent of the ETF above.
LBUL (gold) & LSIL (silver) are leveraged ETFs which means that the price moves in multiples say 1.7x the underlying asset price so for the same investment you can make more profit if the price goes up but for the same reason you can also make a greater loss if the price falls. These ETFs are better suited to short term Capital Gains trades since if left for a year without a price increase they gradually lose value.
To help get you started with investing in ETFs you can receive £50 FREE by emailing selftradeoffer@investing4beginners.co.uk to receive an invite. Then after opening a selftrade account & making a trade of £500 you will receive £50. (see T&Cs on selftrades site)
4) Invest in gold stocks (mining company shares)
This means investing in mining companies of gold through your dealing or ISA account (see section 3 on ETFs for details of how to open these accounts) Few mining companies mine exclusively for silver so you can only invest in general mining companies for silver. This is done through your stockbroker account in the same way that an ETF is bought or sold. With this you may be able to get dividends (income) as well as capital gains. Mining stocks are much more volatile than the actual metal prices so you can make more profit short term but on the other hand make bigger losses if you are not in the know. Ensure you have read up on sharetrading strategies before embarking on this. Please read The Fundamentals of Investing for some important investing must dos (certainly as a novice). I also recommend reading The Naked Trader: How Anyone Can Make Money Trading Shares
