A Step-by-Step Guide for Novice Gold Investors

Investing in gold seems pretty self-explanatory at first glance – simply buy gold, wait for it to increase in value, and then sell it, right? Well, that is a minimalistic way of looking at it; but in reality making well-informed decisions and optimizing your portfolio with gold investing is a bit more complicated. Luckily, we’ve simplified the process into the following three steps:

Step 1 – Choose an Investment Type and Devise a Strategy

First you’ll need to find a suitable way to invest in gold. As a novice you’ll probably want to look into buying gold bullion or purchasing gold holdings online before you advance into using exchange-traded funds (ETFs), mining company shares, and other advanced investment instruments. If you have a 401k plan you may also want to look into investing some of the funds in gold to benefit your retirement. After choosing an investment type you’ll want to create a feasible buy/sell strategy and formulate a reasonable budget that you’ll devote to gold investments on an annual basis. Most experts recommend spending about 10% – 20% of your yearly investment budget on gold holdings.

Step 2 – Monitor Market Conditions and Conduct Research

Even though you’ve already made an investment it is still a good idea to continue to edify yourself in all matters related to gold investing. As an investor with gold holdings it is your duty to ensure that your portfolio is continually optimised. If you want to save time and effort you can gain a lot of insight from financial advisors and fund managers, or subscribe to one of the many online advisory services that offer up-to-date analysis and advice via email or text message. Once you’ve spent money on gold you can continue to invest by spending the time needed to learn about more advanced investing strategies that will increase the profitability of your portfolio.

 Step 3 – Know When to Sell

Knowing when to sell gold to get an ideal profit can be a bit tricky, but there are a few metrics you can use to determine when the right time has come. If any of the following happens you may want to consider selling your gold:

  • If the gold to oil ratio reaches 20 barrels to the ounce
  • If the DOW to gold ratio reaches 5.5 – this would be the equivalent of current gold prices rising to $2,470 per ounce.
  • If the price falls 10% below the 25-day moving average – this statistic has proven to be the most reliable at ensuring an optimal stop loss.
  • Gold prices go through miniature peaks about once every 22 months. The last one was in September of 2011, so the next cyclical peak will probably happen somewhere around June of 2013.
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