How To Invest 10k in Australia – 3 Steps to Success (2020)

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How to Invest in Gold

Allyson Brooks
Contributor, Benzinga

Investors always try to diversify their investments and lower their risk. They especially look for so-called safe haven investments that perform better when the rest of the market down.

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Of these safe-haven investments – treasury bills, francs, and others, investors consider gold to be the best. That’s why you’ll find that investors often include some gold in their portfolios.

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Gold as a Commodity

Like any other commodity, the price of gold is determined by supply and demand. The most of the world’s gold comes from the hard rock mining, but it can also be produced using placer mining methods or as a by-product from copper mining. China, Australia, and Russia are the largest producers of gold in the world. When it comes to demand, gold’s main use is for jewelry production. But, it’s also used in the aerospace industry, medicine, dentistry, and electronics. Governments and central banks are buyers of gold.

Currently, the U.S. is the largest gold holder, while Germany comes second and the International Monetary Fund is in the third place. Private investors are also interested in buying gold and they treat the purchase of gold as an investment.

Why are Private Investors Investing in Gold?

Instead of holding a cash position, investors may buy gold when they expect a recession, geopolitical uncertainty, inflation or a depreciation of a currency. Sometimes they hold it as an insurance from the market decline. You can’t always forecast unwanted events, so it makes sense to hold assets that do well as protection from a market decline. In the last 40 years, gold recorded significant gains from 1978 to 1980 and from 1999 to 2020. It struggled during the 90s and after 2020. Fears of inflation and recession led gold to its 1980 highs, while several events caused gold to trade higher after 1999. The September 11 attacks and the war in Iraq held the price higher until 2003.

Insurance buying was behind gold’s move higher going into the 2007 recession. It continued its uptrend as the market traded lower, with economic uncertainty as its main theme. Problems in Europe, weaker U.S. dollar, concerns over economic recovery kept the gold price high until 2020. Gold is not always performing well. It has struggled during the 90s due to growing U.S. GDP, interest rate hikes in 1995, and a tight fiscal policy. After 2020, the strength of the US dollar and the US economy hurt gold. The stock market broke out of a downtrend and turned in the uptrend and investors were not as interested in owning gold as an insurance.

Now you know a little more about gold and why people may invest in it. Here’s how you can start investing in gold.

1. Buy physical gold

If you want to get exposure to gold, one way to do it is by purchasing gold jewelry, coins or bullion. Gold bullion trades very close to the price of gold and it can refer to gold bullion bars or gold bullion coins.

Bullion doesn’t have any artistic value, which makes it different from jewelry or numismatic coins. To buy gold bullion you have to pay a premium over the gold price which can be in a range from 3 to 10 percent. You will also have to use a vault or a bank deposit box to store it. You can buy physical gold online, in a jewelry store, or another gold storefront.

Before you purchase, make sure the price is fair, the gold is real and tested, and that you aren’t paying a higher premium for collectors coins if you’re just looking for pure gold. Be prepared to walk away if these standards cannot be met, especially if an online store or storefront feels shady.

One trusted online store with a 4.9 rating on google store is Silver Gold Bull, who not only allow you to buy gold, but will also store it, and buy it back should you chose to sell it for a profit.

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Once you buy gold, you have to store it properly. You could store it at home, but some security issues could arise from this approach. If you decide to purchase and keep it at home, make sure you have a proper safe and take the necessary measures to protect your assets.

2. Buy gold futures

Futures contracts are standardized contracts that trade on organized exchanges. They allow a holder to buy or sell an underlying at a specified time in future and at the price from the futures contract. First, you’ll need to open a brokerage account. Check out Benzinga’s Best Futures Brokers rankings to start trading. Here’s how it works.

Gold futures contract at Chicago Mercantile Exchange covers 100 troy ounces. To trade it, you need to deposit an initial margin, which is a minimal amount necessary to open a position. Every day your position is going to be marked-to-market. This means that if the price goes in your direction, you’ll make a profit, but if it goes against you, you’ll lose money.

If your account drops below maintenance margin, you will have to transfer money to your account to meet the amount of initial margin. Futures contracts are leveraged instruments. You need to only need your account balance to be equal to the initial margin, which is lower than the value of the whole contract. Most brokers do not have the delivery option, so the contract is settled in cash when it expires. The expiry is also standardized feature of the gold futures contract and investors can choose their time horizon while keeping standard expiration in mind. Later expiry contracts prices can be higher than the spot price and earlier expiry futures. When this is the case, we say that the market is in a contango.

On the other hand, when the spot price or the price of early expiring contracts are higher than the price of later expiring futures contracts, we are in a backwardation. If you are buying gold when the market is in a contango, you will also have to pay a premium for later expiry contracts.

Your Simple 3-Step Roadmap to Financial Success

The stock market has fallen like a rock over the past several weeks, and it’s making even the most experienced investors a bit gun-shy about their investments. If you’ve never invested before, you’re probably counting your lucky stars that you missed all the fireworks — and the idea of starting to invest right now might be the last thing on your mind. In troubled times, though, the value of having a financial cushion really becomes clear.

Here at The Motley Fool, we’ve seen these kinds of markets before.

Market downturns are a huge opportunity for those who are just getting started in their quest to become wealthy and financially independent. It’s tough to build up the courage to take those first few steps, but once you start, they’re easier than you think.

Below, we’ll share our simple-to-follow three-step roadmap to $25,000 that many of our members have followed to find financial success.

Step 1: Save money

It’s common to want to skip straight to investing in stocks, because it’s historically been the best way for regular people to earn life-changing wealth. But before you invest, it’s important to have your financial house in order. That means doing these things first:

  • Pay down high-interest debt. If you have outstanding credit card balances or other loans that charge large finance charges, then you’ll do better using spare cash to get them paid off rather than investing right away.
  • Have some emergency money squirreled away. It’s never been more important to have some cash set aside for unexpected financial emergencies like getting laid off or needing a major repair. You’ll want to invest for the long term, so keeping some emergency money will prevent you from having to sell your investments.

Once you’ve gotten those priorities taken care of, then it’s up to you to find ways to boost your savings. We have some savings tips here, but they all boil down to looking at expenses you can reduce or eliminate and doing what you can to boost your income.

Image source: Getty Images.

Step 2: Invest in index funds

Here at The Motley Fool, we’re all about finding companies that we think will outperform the stock market over the long run. But when you’re first getting started, having a core portfolio of index funds that will inexpensively match the market’s returns is the simplest way to invest. Moreover, when popular stock indexes like the S&P 500 (SNPINDEX: ^GSPC) have already dropped substantially, it makes the likely future returns from investing in those indexes more attractive.

We suggest starting with three types of index funds:

  • An S&P 500 fund like SPDR S&P 500 ETF (NYSEMKT: SPY) will let you invest in 500 of the biggest and best-known stocks in the U.S. market. You should invest most of your savings in this fund.
  • An index fund specializing in small and mid-sized companies like Vanguard Extended Market ETF (NYSEMKT: VXF) offers chances to profit from higher-growth businesses that have more room to run in the future. Invest a smaller portion of your assets in this fund, as it tends to be somewhat riskier than the S&P 500 fund.
  • An international index fund like Schwab International Equity ETF (NYSEMKT: SCHF) that invests in companies outside the U.S., letting you participate in growth opportunities across the globe. U.S. investors typically invest a fairly small fraction of their savings in international stocks, since U.S. names are more familiar.

When you’re just beginning, the exact percentages you invest in each of these types of funds aren’t critical. The goal is simply to get familiar with the basics of investing, feel comfortable with these investments and, most importantly, to take action.

Step 3: Keep making money

The easiest way to save more money is to bring in more income. That’s not always easy when times are tough, but there are things you can always explore. Here are a few:

  • Ask for a raise. If it’s been a while since you’ve had a pay increase, see if you can negotiate something with your employer. Now might not be the ideal time for this strategy given the unprecedented pressure on the economy, but when things recover, it’s worth pursuing.
  • Work a side gig. There are more opportunities than ever to make extra money in your spare time. Whether it’s driving an Uber, taking on freelance work, or starting an e-commerce business, enterprising people are boosting their earnings and saving more.
  • Invest in your career. Looking for educational opportunities can enhance your earning power by making you eligible for higher-paying jobs. Sometimes, you’ll even be able to stay at your current employer.

As you make more money, save more as well. You’ll see your portfolio balance rise even faster.

Now is the time

It’s scary to think about investing right now, but it’s also the best possible time. With stock markets falling, it’s cheaper than ever to make the investments that will bring you wealth and prosperity in the years to come.

Get started with these three steps today and put yourself on the road to $25,000 and to financial success.

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3 Steps To “Buy What You Know” Success

It’s a Saturday night and you’re out to dinner at a new local gourmet burger restaurant that just opened in the neighborhood.

The place is packed. You have to wait a half an hour in line to order at the counter.

It’s all natural burgers and fries with craft beers and shakes for the kids. The price tag isn’t too horrible.

As more people pile into the line behind you, until it snakes out the door, you think: “This place must be making money hand over fist. I should invest in this.”

And that’s how the “buy what you know” strategy is born.

You love it; everyone else must too.

Why not cash in?

The Birth of “Buy What You Know”

Buying the stocks of companies that you know became an actual investing strategy in the 1980s.

It was popularized by Fidelity mutual fund manager Peter Lynch, who created a strong record of beating the market by investing in consumer names at the beginning of their growth cycles. He states in his book, One up on Wall Street, that he had the most success buying stocks in places where he simply ate and shopped. He understood the business because he was trying out the product.

Lynch has told stories of buying shares of The Limited because his wife came home with bags full of clothes after shopping there. He bought shares of a hair cutting chain after getting his hair cut there and loving the results.

He made it sound so easy.

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The Problem With “Buy What You Know”

Eating at one burger restaurant, in one location, really doesn’t tell you much about how a company is actually performing as a business. While there may be lines at the one you ate at, other locations may be empty on the weekends.

The “buy what you know” strategy CAN work, but it is just a starting point. Even Lynch himself said you can’t rely solely on it. To be successful at buy what you know, you have to drill down into the fundamentals of a company.

But how do you do that?

It’s not too hard if you take it step-by-step.

Deploy these steps to get the most out of the “buy what you know” strategy.

3 Steps Every Investor Must Do to Succeed With the “Buy What You Know” Strategy

Step 1: Google (NASDAQ: GOOGL ) It

Every company has a story. The restaurant or the store you were in isn’t the only one that exists. It’s a chain.

Use Google to find out the scoop.

Yes, this first step seems really easy.

Look for details like how long the company has been in business and what are its best-known products.

Even if you’ve never worn a pair of yoga pants before in your life, you probably know that lululemon makes one of the most coveted pairs of them in the business. But did you know it’s a Canadian company? What other countries does it sell in?

Basic information about the company, such as where it is headquartered, is often found on its corporate website. Check it out.

You may also run across recent press releases announcing new products or store locations. This is also a great way to gather information on the company’s “story.”

Step 2: What Do the Analysts Say?

Once you have the basic background on a company, then you might want to turn to what the professionals are saying.

Research analysts at firms like Goldman Sachs (NYSE: GS ) and Oppenheimer “cover” many of the well-known companies. They provide in-depth research into the company’s prospects and often give their own outlook. These are the people who give the “buy” and “sell” ratings.

The problem is that most investors don’t have easy, or cheap, access to this information. The reports are often expensive or only available to big time money managers.

But you can still get an idea of where the analysts stand on a company without actually reading their in-depth reports.

Their quarterly and yearly earnings estimates are often available on financial sites like

What should you look for in the analyst estimates?

You might want to know if that new burger chain is even profitable. You can check out this year’s earnings estimate to see if it’s making money.

Another key signal to look for is if the earnings estimates are rising. If they are, that’s usually a bullish sign as that means the analysts see good things going forward.

You can actually use the Zacks Rank to do the work of looking at the analyst estimates for you, as the Zacks #1 Rank (Strong Buys) picks only the strongest of the analyst estimates, which will be rising.

If the earnings estimates are actually falling, then it is time to continue on with more research to see if this is a company worth investing in. What is causing earnings to decline?

Step 3: Listen to the Quarterly Conference Calls

To drill down even further into a company’s fundamentals, I recommend listening to a company’s quarterly earnings conference call.

This is where you get the heart of what is going on at a company. If there are ANY problems, they are usually uncovered in the analyst questions.

The conference calls are open to everyone to listen in on. If you can’t listen “live” you can listen to the recording afterwards. Most companies keep them on their website, under the Investor Relations tab, for days afterward.

But don’t just read the transcripts of the calls. Listen to one. You’d be surprised how much you can learn about a company listening to management’s tone of voice.

Now You Are Ready

Once you’ve done your research, now you are ready to determine if the company is really one you want to invest in. Don’t skip the steps.

Does it have outstanding fundamentals and good management? Then it could be time to pull the trigger.

“Buy what you know” is a great strategy. Great growth companies can be uncovered by using it. And as an added bonus, you will actually be a big fan of the company and its products.

But invest smart.

You probably enjoy products and services from more companies than you can count. Doing research on all of them would be unreasonable. How do you know which are the best stocks to own?

If you’re looking for advice in that area, I highly recommend Zacks Confidential. This exclusive service features the experience, resources and extensive research from our team of experts. It also shares 2 or 3 trades each week that are worthy of your immediate attention.

We’ve created another way to “cut to the chase”: our just-released Special Report, 5 Stock Set to Double. Five of our experts each picked a single favorite stock predicted to grow +100% in the next 12 months.

This special report is free for anyone checking out Zacks Confidential by Sunday, October 1.

Tracey Ryniec is the Editor in charge of our Value Investor and Insider Trader. You will also find her contributions, as well as those of 9 other Zacks investment experts, in Zacks Confidential.

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