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According to Gallup, about half of Americans invest in stocks. While investing can result in financial loss, a majority of investors set aside money to strengthen their financial future. Some people are interested in investments but don’t want to put money in stocks or bonds.
We will discuss why precious metal investing may be a good option for you and how to get started.
What Are Precious Metals?
Before we discuss precious metals as an investment option, let’s take a look at precious metals as a whole. Precious metals, like gold, silver, and platinum are rare, and because they are limited, they typically have high value in the economy.
If you think that choosing to invest in precious metals sounds a little “old-timey” (like a gold prospector), you’re not wrong. Precious metals are some of the oldest forms of investments. Before there were stocks, bonds, savings accounts, and even paper currency, ancient civilizations valued silver and expeditions revolved around finding gold.
While there are various types of precious metals, gold, silver, platinum, and palladium have the most economic value. Check out some quick information about each metal:
We all know gold for its rich golden yellow color. Although gold is best known for its use in jewelry making and currency, other applications include thermal insulation, dentistry, and even in electronics like our cell phones.
Since so many moved West during the Gold Rush, it’s understandable to assume that the U.S. is a significant source of gold. Other countries where gold mining occurs include South Africa, China, and Australia.
While some may consider silver as “less” of a precious metal than gold, its uses are just as versatile. Although we may know silver best for its use in jewelry and coins, its uses extend to batteries, electronics, and even photography.
Even though silver isn’t a commodity of the U.S., most silver comes from Peru, Mexico, Chile, and China.
People often have difficulty recognizing the differences between platinum and silver because platinum looks very similar, particularly at first glance; the word platinum even derives from the Spanish word platina, which means “little silver.” Like silver, platinum uses stem back to ancient civilizations.
Today, platinum uses are versatile and include jewelry, dentistry, and in some chemotherapy drugs. South Africa, Canada, and Russia are some of the major producers of the precious metal.
Palladium is similar to platinum and is often used to make “white gold” jewelry. Since palladium is silvery-white in color, someone with no expertise in metals may easily mistake the rare metal for silver or platinum.
The U.S. is one of the major sources of palladium, as is Russia, South Africa, and Canada. Like other similar precious metals, palladium has a variety of uses beyond jewelry.
Why Should You Invest in Precious Metals?
Now that you know more about the basics of the precious metals with the highest value, you may be wondering why people choose to invest in rare metals. There are a variety of reasons why someone might invest in precious metals, but here are some of the main reasons for doing so:
Diversity in an Investment Portfolio
Not only are precious metals as an investment unique and maybe even an impressive conversation starter, bit it can also add a little diversity to your investment portfolio. If you don’t already have an investment portfolio, much like its name suggests, it’s a collection of investments. Think of an investment portfolio as having a little bit of everything.
Ideally, an individual’s portfolio should be well-balanced and have a variety of investments such as stocks, bonds, and other investment options. While the investments should work well together, they don’t need to have a close relationship with one another.
If you’re looking for a little more balance and variety in your portfolio, precious metals may help. If you haven’t created a portfolio yet, keep an investment in metals in mind.
Precious Metals Have A Strong Future
People who get into investing are well aware it’s important to remember the “win some, lose some” mentality. While some investing options, like stocks, result in high returns, there’s almost always a certain amount of risk involved, and the investments are often short-term (especially when investing in trending businesses or even fads).
With its long history of value, it’s safe to assume that even though one precious metal may be more valuable than another, it is likely to have a strong future and outlast other investment opportunities.
Hedge Against Inflation
While some investment experts don’t think that the U.S. currency is at risk of drastically losing its value, others believe it’s only a matter of time. Despite your stance on the topic, investing in precious metals may protect your portfolio. How? Like we mentioned above, precious metals continue to obtain value after centuries and they can better protect your financial future.
Which Precious Metal Is Best?
Newcomers to precious metal investing often wonder which is the best precious metal to invest in; depending on who you talk to, you’re likely to get mixed reviews. Before you settle on which precious metal may get you the best returns, you’ll want to take a little time and do some research.
Remember like many investment opportunities, it all comes down to what you want to do. Here are some things to consider when choosing an investment metal.
A Quick Look at Gold
As we all know, gold has been sought after for centuries, and it was so popular that it caused people to migrate and settle to various parts of the United States. According to some experts, the value of gold is determined by the market, 24/7. Unlike other metals whose value is determined by supply and demand, the value of gold is more about the desire to buy or sell.
What does this mean? When people with a collection of gold decide to see, the value drops and when there’s a desire to buy gold, the value skyrockets. Why? There is more gold in existence rather than a new supply of gold.
It’s not that gold isn’t valuable, but you need to pay close attention to what gold collectors are feeling as well as an increase in financial concerns or even political issues. When times get tough, people are more likely to want more gold.
The Lowdown on Silver
While the value of silver is historically older than silver, its value changes depending on how the metal is used. Even though silver has a strong presence in the jewelry and currency world, it’s an essential metal in the industrial world, too. Unlike gold, the value of silver is more dependent on supply and demand.
Since silver is a popular metal, regardless of its application, it’s likely to hold some value.
What About Platinum and Palladium?
Even though platinum and palladium aren’t as old or as popular as gold and silver, their potential value should not be overlooked when considering them as an investment. Since both of the metals are rarer, they typically have a higher value when financial and political concerns are low (not like gold, which is popular during various “crisis” modes).
Like silver, both platinum and palladium, are versatile metals and the value is also dependent on supply and demand, not just the political climate.
As you can see, there’s no clear answer which precious metal is best, but now that you have a little more information, you can decide where to get started. Don’t rule out the possibility of investing in more than one type of precious metal; just be sure you understand the basics to make sure it’s the best fit for you and your investment portfolio.
Learn How to Invest In Precious Metals
Now that you have a basic understanding of the value of precious metals, it’s time to talk about how to invest in precious metals.
Do Your Research First
As with anything that could potentially affect your financial future, it’s always important to do as much research as possible. While we have supplied you with some of the basics of precious metal investments, you may benefit from knowing a little more before making your final decision.
Weigh the pros and cons and like other investment opportunities, look at the investment realistically and consider it carefully.
Talk to A Financial Expert
If you are getting into investing for the first time, it’s a good idea to talk with an investment advisor as he or she can help you get off to a good (and confident) start. While many people successfully create an investment portfolio on their own, it’s not always the best DIY option for everyone.
Even if you already have a portfolio and a little experience with investments, it may not be a bad idea to talk to a professional about investing precious metals.
Decide How You Want to Invest in Precious Metals
Aside from deciding which precious metal to invest in, figuring out how you want to invest is essential. Here are some of your options:
Buying Precious Metals in A Physical Form
Some people prefer to purchase precious metals in their physical forms, such as coins and bars. While many investors like to have a tangible investment, you need to ensure that you have a storage space that is large enough as well as secure.
When storing precious metals, you also need to consider which metals take up the most space and which ones are more likely to tarnish (it’s best to keep the metals in mint condition).
Invest in Mining Companies
One way that some invest in metals is by investing in mining companies. When considering this investment option, it’s important to look at mining companies as you would other stocks. It may go without saying, but you’re more likely to see a better return when you invest in a mining company with a long and successful history.
Go the ETF Route
An Exchange-Traded Fund (ETF) is another way to invest in precious metals. When you purchase an ETF for any of the precious metals, it’s traded on the stock exchange.
Not only do you have security on your investment, but you make a profit when others purchase precious metals. You may also want to consider mutual funds as an option if you aren’t interested in ETF’s.
Keeping Track of Your Investments
Once you’ve decided how you want to invest your precious metals, it’s important to keep track of your investments just like you would with other investments. Some easy ways to track your investments is to use online tools and stay up to date on the news.
Keep in mind that even though the financial section can give you a lot of important information, don’t forget to pay attention to other news such as political issues and growing trends in the industrial world. Remember, depending on which precious metal you’ve invested in, the value may fluctuate depending on industrial, political, and other current events.
Revisit Your Financial Goals and Consider New Opportunities
Whether under the advisement of your financial planner or on your own time, it’s always a good idea to revisit your short and long-term financial goals to see how they are doing and if any changes need to be made.
If you are happy with how your investments are going, you may want to consider some new investment opportunities in precious metals.