It always makes sense to diversify your investments, and gold should not be overlooked. Many investors are jittery about investing in gold because they know very little about it, so the first place to start is to learn about the commodity as an investment.

Gold provides a 'hedge' against the devaluation of your portfolio because its value actually tends to increase while other markets decrease. One of the easiest methods of doing this is buying gold coins.

Some of the advantages of investing in gold coins include:

• They are readily available from a wide variety of sources.
• They can usually be bought at a bargain when other investments are doing well.
• The worse the economy gets, the more valuable your gold coins will be.
• Gold coins (bullion coins) can be quickly and easily sold for cash when the need arises.
• They are easy to store.

Two types of gold coins
There are two types of gold coins: production or 'bullion' coins, and rare coins, says Frank Stuy, senior broker with the South African Coin Corporation. Production coins, such as Kruger Rands, are valued according their weight. They are easy to sell because they are almost as liquid as cash. A rare coin however is subject to market forces of supply and demand and could take up to a year to sell.

Buying rare coins
The returns on rare coins tend to be higher but they also come with an element of risk. Like art, rare coins do not consistently move in an upwards direction, so you need to be knowledgeable about the type of coin that you are buying and its desirability in the market. Stuy says you should take a long term view when buying rare coins and not expect to turn a quick profit in the short term.

When buying rare coins it is vital that you deal with a reputable supplier and that the coins are properly graded. Stuy says that there are two internationally recognised grading companies that provide this service, both based in the US. The coins are graded according to condition, then sealed in a tamperproof sleeve with a serial number. The three grades are proof, mint and very fine.

Watch out for scams
The business of buying and selling coins is lucrative not only for the investors, but for scam artists too. Stuy says the most common scam in South Africa is for the dealer to offer a high guaranteed buy-back of your rare coin one year after you have purchased it (as much as 35 percent). When you try to resell it, the company has closed its doors and chances are you overpaid in the first place.

In the US, salespeople are very adept at selling their victims coins and then persuading them not to take delivery, but to put them in safekeeping with them. I don’t need to tell you what happens next. It is only a matter of time before these scam artists start similar tactics here.

Tips for buying gold coins:

Educate yourself and visit www.sacoin.co.za

The biggest trap investors fall into is to buy a gold investment without taking into account what their objectives are. Most often the safe-haven investor simply wants to add gold coins to his or her portfolio mix, but instead they get caught up in the hype and end up with a handful of exotic rare coins stuffed away in a safe.

These have little to do with safe-haven investing, and most investors would be well advised to talk to an expert in the field who can aid them to develop a sensible strategy.

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