In a recent article, TheStreet.com offered their advice to first-time gold buyers. The concepts are simple, but for investors new to precious metals, it can get a little confusing.

According to the article, there are three main mistakes to avoid:

100 gram barRule #1 - Don't Get Ripped Off

Many companies charge a high percentage over the spot price of gold for bullion purchases. The article specifically mentions that buyers should not pay more than 5% to 10% over the spot price of gold. According to the article, "Premiums though can reach as high as 75% or more based on the gold item. Kitco (an online gold dealer) is also selling a one-tenth of an ounce gold eagle coin for $162.12, which is a 35% mark-up."

At The U.S. Gold Bureau, the typical mark-up is only 2% to 5%. Gold bars are generally the cheapest way to buy gold bullion, since the U.S. Mint marks up the price of coins, due to the expense of the minting process.

 

Rule #2 - Be Careful with Gold Related Stocks

It is difficult for investors to pick the right gold-related stocks. Gold mining companies, like any business, depend on good management practices, corporate business strategy and their ability to beat their competition to be successful. As the article states, you "have to pick the right stocks, which is a risky business."

The experts at The U.S. Gold Bureau believe that investing in gold companies exposes investors to the same risks that any stock market investors have. They recommend that people looking to actually diversify their portfolios look to physical gold and rare coins, rather than just investing in another company's stock.

 

Rule #3 - Understand that exchange traded funds (ETFs) are NOT physical gold

Many investors come across ETFs like GLD, IAU and SGOL when starting their research in precious metals and mistakenly believe that shares in these funds represent actual gold. According to the article, "It's also hard to determine if the gold in the ETFs really exists" and "The funds hold gold and issue shares, but you own a paper representation of gold."

At The U.S. Gold Bureau, clients take physical possession of the gold they purchase, so there is never a concern about the validity or security of the investment.

Read the full article here.