Gold is the stuff of treasure chests and bank heists, but it can also be an excellent investment. While purchasing physical bullion presents storage and insurance issues, there are a number of other ways to invest in the precious metal.

Buying shares in companies that extract or license the rights to mine gold offers another less-frenetic option. These stocks often generate cyclical results, but can still provide diversification.

Physical Bullion

Physical gold can be an excellent addition to a well-diversified portfolio, especially during times of uncertainty. However, investors need to take into account storage costs, insurance and other considerations when investing in physical bullion.

Another benefit of physical gold is that it has no counterparty risk, unlike a stock or ETF. Unless you buy a bar or coin from a questionable dealer, you’re the sole owner of your gold investment.

Investors can also invest in physical gold through futures contracts, which allow buyers to trade gold bullion at a specific date for a price agreed upon by both parties. This type of trading is typically suited for more experienced traders. Gold futures do carry some degree of counterparty risk. They also don’t provide the same return as physical bullion, so they may not be an excellent diversifier.

ETFs

There are a number of ETFs that offer exposure to gold without the hassles of owning physical bullion. SPDR Gold Shares (GLD) holds physical gold and deposit receipts, while VanEck Vectors Gold Miners ETF (GDX) invests in the shares of gold mining companies. While these funds don’t generate any yield, they may provide more stability and liquidity than physical bullion.

For investors seeking more direct price exposure, futures contracts and options are available, although they can be volatile. These investments are considered speculative and may be risky for beginning investors. Investors can also diversify their retirement portfolio with a Gold IRA, which offers the opportunity to grow on a tax-deferred basis over time. This can be done with a traditional or Roth account.

Mutual Funds

Investing in Mutual Funds offers you a wide variety of investment opportunities across different asset classes, structures and risks.

Mutual funds are pooled investments by a number of investors and managed by expert professionals. They are a great way to diversify your portfolio with a much smaller capital outlay.

Equity (stock) funds are investments in company stock and offer the potential for higher growth and returns than bonds or cash alternatives. Bond funds are investments in debt instruments issued by governments and companies, providing lower growth potential but stable income.

Target date funds hold a mix of stocks and bonds, shifting the allocation over time to match your retirement goals. Fees and expenses vary between funds, so read the prospectus carefully.

Mining Stocks

The mining sector is a popular way to diversify your portfolio while investing in gold. Many people are familiar with the saying “If it isn’t grown, it must be mined.”

As with all investments, mining stocks come with risks. They are influenced by the price of their primary product, but also by other market factors like supply and demand, as well as operational risk. Conducting thorough research and seeking the advice of a financial professional can assist in making sound decisions regarding this risky investment sector.

It is important to evaluate the management team’s track record and experience as well as a company’s financial health and debt levels. These factors can help minimize the potential for volatility in the stock prices of a mining company.

Gold IRAs

Gold IRAs are a way to add precious metals to a retirement account. These accounts follow the same regulations as traditional pre-tax IRAs, Roth IRAs and simplified employee pension (SEP) IRAs. They have yearly contribution limits based on taxable income and tax-deferred growth until withdrawals are made in retirement.

While gold IRAs have benefits, they’re not for everyone. It’s important to consult with your personal legal and financial advisors to decide if they’re the right fit for your investment goals.

Look for a gold IRA provider with a good reputation and a solid customer service team. You should also compare fees, including storage and setup fees, as these can eat into your overall return on investment. A good provider will also have an excellent Better Business Bureau rating and hundreds of five-star reviews.