Investing one’s hard earned money is a wise financial decision because there will come a time when you will not be able to earn money easily. A lot of people have taken the first step of making the decision to start investing. But the main issue is in picking the right investment and the right company to work with.
There are many investment options that one can choose from but the one that’s becoming more and more popular is precious metals. Precious metals that are approved as investment include gold, silver, palladium and platinum. These metals have shown their ability to hold their value even in times of economic upheaval and even appreciate in those periods.
Precious metals are considered a safe haven for investors because of the feature of holding their value even in economic crisis. You can check out this site for more on how precious metals are safe haven investments: https://www.sciencedirect.com/.
Why You Should Include Gold and Silver in Your Portfolio
We have touched briefly on why you should include precious metals in your portfolio. Below are more reasons why gold and silver should be part of your portfolio:-
- Hedge against inflation and market volatility
- Remains solid even in the midst of political instability
- Remains strong even when currency is weak and even when economies collapse
- They are a great store of wealth
- They do not have credit risk
- Is not strongly connected to real estate, stocks or bond
Different Ways of Investing in Gold and Silver
There are different ways of investing in gold and silver and they include the following:-
- Buying physical silver and gold
- Investing in precious metals ETFs and mutual funds
- Buying shares in mining companies
- Investing in precious metals futures and options
- Opening a precious metals backed IRA account
Of the options above, the IRA route is daily gaining popularity. You can learn more about it here.
Investing in Precious Metals ETFs and Mutual Funds
Investing in ETFs and mutual funds backed by precious metals exposes the investor to the spot price of these precious metals without owning them physically. The funds may be in portfolios with assets that include futures contracts, bullion and stocks of mining companies.
This investment method provides the benefits of diversification and reduces potential risks for the investor’s portfolio on a broader scale. Gold, silver and other precious metals are seen as safe haven assets because they are known to withstand economic upheaval or uncertainty. Note however that these funds can also be volatile which is why they should be used only as part of diversification of an investment portfolio and not the only investment asset.
Buying Shares in Mining Companies
This method of investing in precious metals involves buying shares in a company that mines the metal you are interested in. This will provide the investor with exposure to the prices of the commodity and potential to make profit if the company does well.
This however, can be a risky investment because these mining companies are susceptible to production costs, fluctuating commodity prices and political and environmental risks. This therefore means that the investor has to carry out proper and thorough investigation or research to determine the company (ies) to invest in.
In addition, an investment in a mining stock portfolio that’s diversified will also reduce the overall risk thereby improving potential returns.
Buying Physical Silver and Gold
As the title already implies, this involves buying the commodity in its physical form such as bars, coins and any other form the refined metal may come in. You can buy this through many sources like online dealers, local coin shops and auction groups. Companies such as Silver Gold Bull can help with your bullion buying experience to ensure that it is seamless and legit.
Investing in Precious Metals Futures and Options
This involves placing wagers on the future price of whatever precious metal you choose. Futures contract is an agreement to sell or buy an asset at a particular price on a set date in future. Options contract on the other hand gives the holder the right to buy or sell an asset at a specific price before the expiration date; however, there is no obligation on the part of the holder to follow through with the contract.
These two instruments are used in speculating the price movement of commodities or mitigate the risks associated with the commodity. However, these options of investment are highly complex and risky and should not be entered into lightly. One must be savvy about the market and know how to engage the right strategies to make profit.
Factors to Consider before Buying Physical Bullions
Having discussed different ways through which you can invest in gold and other precious metals, we will now concentrate on the buying of physical gold and silver. Below are some factors to consider as you think of investing in any precious metal:-
Your Investment Goals and Budget
It is very important that you have a clear picture of what your investment goals are and the amount of money you intend to commit to it. Buying physical silver and gold is a long term investment so you need to be sure of what you hope to achieve at the end of the day.
Look out for Reputable Dealers
Buying physical silver and gold is not child’s play and as such should not be engaged in without due diligence of the dealers you choose to work with. Look out for reputable dealers who will give you fair prices for genuine products. You can further look out for membership of reputable associations in the industry like: https://www.ncbassoc.org/. Dealers who belong to associations such as Industry Council for Tangible Assets or Professional Numismatists Guild are less likely to swindle you or offer you fake products.
Consider Options for Storage
Physical bullion needs safe storage and every investor has to think of how and where they will store the commodity. The options available include bank safe deposit, home safe and storage facilities. Ensure that you choose the one that will serve you the best; do not fail to consider security as you make your choice.
Decide on the Form to Buy
There are many forms of physical precious metals such as bars, coins and rounds. Each of these forms has their pros and cons and investors need to consider them. They should also consider purity, weight and minting history so as to make an informed decision.
You can check out this site for more factors to consider.
We have discussed some methods of investing in gold and silver with emphasis on buying the physical form. The tips shared here would go a long way in helping you make informed decisions if you are considering investing in precious metals.