If you are thinking of investing in precious metals, you’ve come to the right place. This guide gives you all the information you need to get started. So, without further ado, let’s get right to it…
Precious Metals — What Are They?
Precious metals have high economic value, and are very rare. Here are the most common types investors deal with…
Palladium
Palladium has a very important role in the industrial business. Palladium is utilized in jewelry, chemical applications, groundwater treatment, dentistry, electronics, musical instruments, and blood-sugar test strips.
Despite the rarity and high value of palladium, investors don’t really pay as much attention to this precious metal as they do to others such as silver and gold. You can click here to learn more about palladium
Platinum
Similar to palladium, platinum is mainly used for industrial purposes. Platinum is used in the refining sectors and computer industry.
The industry which uses platinum most is the automotive. It is used to create catalytic converters (these help reduce the emissions from the exhaust of vehicles).
Platinum is also used a bit in the jewelry industry (you might have seen some rap artistes wearing them or referring to them in one way or another). It also has decent investment value due to its rarity. However, it doesn’t compare with others, such as gold or silver.
Silver
Silver is one of the most common ones out there. Similar to metals such as platinum and palladium, silver is used for industrial purposes.
This metal is used to create bars, jewelry, coins, and silverware. Due to the electrical properties of this metal, silver is a very important component in the solar panel business.
Silver has store value, and industrial value. As a result of the dual roles it plays, the price of this metal has the tendency to be a lot more volatile than that of gold. This greatly impacts the pricing of silver stock.
Times of high investor and industrial demand can cause silver to outperform the prices of all precious metals (gold included).
Gold
Gold is, without a doubt, the most investable and well-known metal. This metal is famous for its electricity and heat conducting capabilities. It has great shaping capability and also doesn’t corrode.
Gold is used mostly in the coin or jewelry market. However, it is also used for some industrial purposes such as electronics and dentistry.
Due to its high store value, gold is sought-after during political or economic crisis by investors as safeguard against coming inflation.
One can invest in gold through various means. It can be bought physically in the form of jewelry, gold coins, or bars. You have the option to purchase gold-centered mutual funds, gold-centered ETFs (Exchange-Traded Fund), or gold stocks (this includes royalty companies and gold-mining shares).
You need to keep in mind that there are various advantages and disadvantages associated with each of these gold investment options. For instance, an advantage of physical gold investment is the ability to monitor the price. An advantage of ETFs and gold stocks is the out-performance potential.
On the other hand, the downside of physically investing in gold is the insurance and storage expense. While ETFs and gold stocks have the potential to out-perform, you also need to keep in mind that under-performance is also a possibility.
Precious Metals Investment Options
Here are the different ways one can invest in them…
Bullion
One should not invest in bullion (bars and coins) unless they have a space to store them. Those looking to invest in bullion must have a safe or safety deposit box.
People who store bullion are most likely preparing for the worst to happen; this is the only option that will give them confidence. They can be purchased from authorized companies. You can go to Texas Precious Metals for more on this .However, bullion is bothersome and a huge pain to store for investors, because it is illiquid.
ETF (Commodity Exchange-Traded Fund)
Unlike bullion, ETFs are a liquid and convenient means of selling and buying precious metals. However, you will not receive a delivery of them physically. As a result, you can’t lay a claim on the precious metal in the fund.
Precious Metals Investment Vs Stocks Investment — What Are the Advantages?
The main advantage which precious metals investment have over stocks investment is the high liquidity level. They are also easier to purchase, can act as an inflation hedge, add diversity to your portfolio, and have intrinsic value.
Precious Metals Investment — Understanding the Risks
There are certain risks an investor should be aware of before going into this type of investment. For more on this, read this article: https://www.investopedia.com/. For example, one important thing you need to keep in mind is the volatility of price. Various factors control the pricing of precious metals such as mining supply, inflation, Federal Reserve policy, economical changes, and investor demand.
Is Investing In Precious Metals Worth It?
At this point, you must be wondering whether investing in these metals is worth your time and money. Investments here have an average yearly return of roughly 3-5%.
Profits aside, many investors use them as a means of protecting themselves against inflation, economic crisis, and the erosion of major currencies.
If all these things are important to you, then investing in precious metals is absolutely worth it.
What Quantity Of Precious Metals Should One Own?
The quantity of precious metals owned by investors varies greatly between each individual. There is no set quantity a person must own. However, finance experts recommend that an individual hold between 10% and 20% of their net worth in such metals.
Conclusion
Precious metals investment isn’t a walk in the park, and certainly isn’t meant for everyone. Before starting the investment, you should ask yourself why you want to (to bring diversity to your portfolio, make profit from high prices, store value, or protect yourself against inflation).
This form of investment comes with various risks, and isn’t something one should go into unprepared. To start investment, you’ll need to choose the investment vehicle that works with your investment thesis best.
