You can diversify your portfolio by investing in bonds, stocks, or mutual funds, as these tend to have higher returns rates and less risk. But what of precious metals? Are they worth investing in? And if so, where do you start? Stay tuned!
What are Precious Metals
Unlike bonds or stocks, precious metal investment is different in that it involves the selling and buying commodities not tied to the stock market. They are a great place to invest your cash should economic uncertainty occur. The price of precious metals usually rises with the dollar’s weakening and remains relatively stable or experiences gains during other times. Anyone can invest in precious metals, whether beginner or pro and doing so is not difficult either. So, which precious metals can one invest in?
Gold is the most popular precious metal worldwide and has a variety of uses, including electronics, medical, dentistry, and jewelry. Every year about 40% of gold produced goes into holdings or stockpiled by governments and investors worldwide. Currently, gold costs $1,700 an ounce, down from August 2020’s costs of $2,070.
Since platinum is less available (mainly mined in South Africa), it’s more expensive than silver and gold. Platinum trades at around $1,257 an ounce at the moment. The price has shot by 16.64% from last year’s costs due to low output, thanks to Covid-19.
With more than 70% of silver being secondary produced (a byproduct of zinc, copper, lead, and other metals), the metal is readily available, a safety net during uncertain times, and more affordable than gold and platinum. Silver also has more practical applications like photography, batteries, dental alloys, or solar panels and currently costs $27 an ounce.
Although often overlooked, copper is the third most used metal worldwide. Copper also has a relatively fair price of $4.25 a pound. The price is expected to increase due to increased demand from China and industrial activity growth.
Palladium is similar to platinum; only that is rarer. This scarcity makes it more expensive ($2,425 an ounce) than gold. The metal has many uses like dentistry, electronics, jewelry, and car catalytic converters, increasing demand. With increased demand and low supply, palladium prices don’t seem to decrease soon, making it an expensive choice for an ordinary investor.
How Can You Invest in Precious Metals?
There are various ways of investing in precious metals. They include:
Purchasing shares of firms involved in mining and producing physical metals is one way of investing in precious metals. When metal prices increase, the stocks also rise, and dividends are high. Likewise, when stocks fall, metal prices decrease, and thus bonuses are low.
Choosing the right company is the first step in getting the most from investing in mining equities. And one way of doing so is by reading company reviews and feedback. However, these reviews should be from reputable sources; luckily, folks at https://goldiracompanies.com/reviews/ have compiled reviews of numerous precious metals companies that can give you the green light in your decisions. A stand-out company with good management and understanding of creating shareholder value is worth investment.
But if the gold mining company has poor management, chances are you’ll not get value or, worse, lose your money in the investment. So, don’t jump into investing without doing your homework.
Exchange-traded funds (ETF), like a mutual fund, refers to a collection of securities that trade on stock exchanges and aim to duplicate the cost action in precious metals. Although a bit expensive, ETFs are among the easiest ways of investing gold and silver, with the advantage of them being extremely liquid. You can buy or sell precious metals within your brokerage account, letting you easily re-balance your portfolio and have hassle-free trades. The drawback of this method is that most ETFs cannot be redeemed for silver and gold, so you don’t have the precious metal physically in hand.
Bullion involves buying physical metal such as coins or bars. This method is considered the most straightforward and safest, especially for small metal amounts. However, bullion is not ideal for investing large amounts of cash as that would mean having lots of gold or silver in a physical store. Storing precious metals in physical areas may bring security issues. So, consider keeping it offsite professionally where there’s security. However, doing so would incur fees, but it’s better than having it at home.
Investing in precious metals may be a great way of diversifying your portfolio and providing a backup plan in times of economic uncertainties. While there are many precious metals investment options, choosing those that meet your needs and align with your goals is vital in ensuring success.