Gold Stocks Vs. Physical Gold: Portfolio Options Explained

The digital world allows anyone to invest in gold in many different ways. Anyone can access any kind of investment online. There are many convenient methods for people to own shares or actual forms of gold.

There are various ways to put your money in gold. The simplest and most dependable method is acquiring the metal physically and storing it in a secure inventory. However, many non-physical schemes are also available for those seeking more convenience.

Investors can try earning from gold by either exchange-traded funds or ETF, buying futures options, or buying mining stocks.

These hands-free manners of earning from the metal relieve an investor of storage costs, transaction fees, and insurance. However, there are risks in not having your gold in your hands.

How do they work, and what advantage do they offer over owning an actual gold inventory?

Are the advantages of owning stocks over physical storage worth the risks?


ETFs work like the stock exchange. Earning and losing money will depend on an investor’s knack in forecasting the rise or fall of gold costs. Buy and sell depends on the movement of shares and the metal’s price.

There are many ETFs for several commodities, not only gold. It is a hassle-free way of trading, as it is purely online and doesn’t require your expertise.

The ETF company will gradually buy physical gold with the money of the shareholders, and gold assets back your investment.

With an ETF, you are one of the investors who are collectively trusting a company to trade this valuable metal and make a good profit.

The advantage of this scheme is that it is one of the lowest-cost ways of earning from gold and deletes all the hassles of physical storage. However, stocks rise and fall faster than gold’s value, and an ETF company’s funds are very volatile. Plus, when the ETF company fails, you’ll lose your money.

When investing in an ETF, you must always have a back-up.

Futures Options

Gold futures are agreements between buyers and sellers that trade on exchanges. The buyer agrees to purchase a quantity of gold at a predetermined price at a set future date.

Many people who want to protect their investments use futures contracts to manage and minimize the price risk associated with gold. Investors also use the arrangements to take part in the market with no physical backing.

In long-term futures contracts, an investor buys gold with the expectation that the value will rise. For the short-term, an investor sells the metal but intends to cover it later at a lower price.

Gold futures require no management fees. Plus, resulting taxes are split between short and long-term capital gains.

The disadvantage here is that you and your partner have no control over future events. Plus, you will not have access to your property until the date in the contract.

Mining Stocks

When you put money on mining stocks, you capitalize on the activities of a gold mining company. You become a shareholder of their business, and you earn from the company’s sales.

The good thing about this is that the method is clear as day. You are giving them money they use to operate, and when they make a sale, you get your money back, plus a share of the profit.

However, the business is volatile in itself, and the mines are producing less and less gold nowadays.

Gold Certificates

You can own gold via a certificate that says you do. It doesn’t work as stock and is straightforward and simple.

Someone is keeping your metal for you, and you have an on-paper proof that you own it.

The problem with this is that when the company holding your gold goes bankrupt, your certificate will be rendered useless. Plus, during global crises and war, nobody will trade food for your piece of paper.

Why should I invest in stocks?

  1. It is convenient. You don’t need to deal with the troubles of maintaining an inventory.
  2. It is easy. You don’t need to know that much to invest.
  3. It trades fast. You can sell your stocks anytime.
  4. It has fewer requirements. You do not need insurance for stocks.
  5. It can be cheap. There are investment options that come at lower costs.

What are the risks?

  1. It is volatile. A lot of factors are in play with most stock options.
  2. You don’t actually own gold. You have very minimal control over your investment.
  3. They are risky. When the company you are investing in fails, you will lose your money.
  4. It’s an easy place for scammers. The complexity of trade systems can be a breeding ground for fraudulent schemes.
  5. You don’t have the gold in your hands.

What does owning physical gold entail?

  1. There are different types of metal that are valuable in different trade niches. There are US mintage, commemorative coins, fractional coins, rounds, bars, and more.
  2. You have full control of your investment. It is there where you put it, and it will go where you want it when you want it.
  3. It is a solid hedge against inflation. When the dollar’s value drops, the dollar per ounce of gold rises, and you have it in your hand.
  4. It is a great diversification asset for your portfolio. You can back-up an ETF, Futures contract, or Mining Stocks with physical ownership.
  5. A gold collection is aesthetically pleasing. It gives you tangible confidence in your wealth.
  6. It is a more secure store of value. Use it like in-house savings that you can gradually grow.
  7. You can pass it on as an inheritance. You can literally hand it over.
  8. You can become an ETF dealer. You can earn by starting your own ETF business.
  9. You can reform physical gold. You can turn them to jewelry and sell it with added aesthetic value.
  10. It is easy to purchase. There is a vast catalog of online stores where you can buy gold.

You can do both. Experts suggest that the more types of investments you have, the more you secure your finances.

When your stocks fail, you can count on physical gold to secure you. When you’re keeping your physical assets dormant and are storing gold in the long-term for future trade, you can profit from ETFs in the meantime.

However, if you’re to choose one, the most secure way to invest and profit from gold is through physical. All advantages of actual ownership mitigate the risks and win over the benefits of stocks.

When you can, invest in many types of assets, but always put gold on top of your list.


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