How to Invest in Gold Safely & Securely

Avoid gold buying scams.
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If you feel that the price of gold is primed for a rise, you have a number of options for investing in this precious metal. But even though gold can be a good investment and an excellent way to hedge against future inflation, you need to be careful. Gold investment scams abound, including companies that sell gold coins at highly inflated prices and even scam artists who sell gold they do not even own. Avoiding these scams and finding a safe investment is critical to your future wealth.

Step 1

Contact several mutual fund companies and ask for prospectuses for their gold funds. You can log on to the company's website and review the prospectus online. Most mutual fund companies have funds that invest in the gold market, either by purchasing the metal itself or by investing in gold mining and gold exploration stocks. Since companies in the gold mining and exploration industry do well when the price of gold rises, mutual funds made up of those companies are good ways to play the gold market. Mutual funds hold many different stocks in their portfolios, so you can reduce the specific stock risk that comes with buying individual gold mining or exploration stocks.

Step 2

Review each prospectus carefully, especially the sections dealing with performance and investment costs. The costs of investing can really eat into your returns, so look for a fund that has had a solid performance with a low expense ratio. You will find the performance of the fund, and its expense ratio, listed near the front of each prospectus. Use these fees and returns to compare the various gold funds and find the ones that best meet your own needs.

Step 3

Consider investing in the exchange traded fund that tracks the price of gold. This ETF trades under the ticket symbol GLD, and it rises along with the price of gold. An exchange traded fund is much like a mutual fund, but it trades in real time during the trading day. This allows you to establish the prices at which you want to buy and sell, and your trades are only executed if the price reaches that level. For instance, you could set a limit order to buy GLD at $100, and your purchase will not go through until the fund reaches that level.

Step 4

Complete the application for the gold mutual fund you want to invest in, or log on to your brokerage account to buy the GLD exchange traded fund. The GLD ETF tracks the price of gold directly, so it is more of a pure play than buying gold mining and exploration stocks.

Step 5

Submit the completed application, along with your initial deposit, to the address listed on the form. Be sure to keep copies of your purchase confirmation with your tax records.

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