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Monday, August 23, 2021

5 Considerations When Investing In Precious Metals

While “Don’t put all your eggs in one basket” mostly applies to farmers looking to reduce losses if something weird happens to one basket, it can also be applied to investors looking to minimize the risk through portfolio diversification. If you don’t know this already, diversification of a portfolio is the process of investing capital in different securities in order to mitigate the overall investment risk.

With that said, the best way to diversify your portfolio is through investing in precious metals. Because, unlike other asset investments, most precious metals are always stable. In other words, they aren’t affected by the economic crises, and their values always remain high. Also, precious metals are traded in almost all parts of the world. This makes their demand consistently high.

With that said, in this article, you’ll learn all you need to know about precious metal investments, including what precious metals are, what to consider when investing in them, and much more.

What Are Precious Metals?

Precious metals are very valuable organically occurring elements and are rare to find. What makes them highly valued is their scarcity and their unlimited application in industrial processes.

One major application of most precious metals is the manufacture of valuable jewelry items such as watches, rings, and other accessories. Precious metals can also be used in dental technology and the electronic industry to manufacture non-corrosive items.

What Are The Common Types Of Precious Metals To Invest In?  

While there are many other metals, the most common precious metals are gold, silver, platinum, and palladium. Here’s a quick comparison between these metals:

  • Gold 

When it comes to investment options, gold takes the lead. Gold is considered the king of all precious metals.  Because of its durability and malleability, gold remains the most in-demand metal in the world.

One major application of gold is in the jewelry industry. More than 80% of the gold produced each year is used to make jewelry items.  Also, gold is highly efficient in electrical conductivity. It can be able to carry tiny electrical charges. This makes gold’s demand high in the electronic and tech industries. Some of the largest producers of gold are Australia, China, South Africa, and the United States. If you’ve decided to invest in gold, you can consider Oxford Gold’s IRAs or other reputable dealers to guide you through this investment opportunity. Make sure they have the right paperwork before dealing with any group, though, to avoid any scams.

  • Silver

Silver comes in number two on the list of precious metals. Just like gold, silver has many applications in the industrial and jewelry industries. For instance, it can be used to make rings, bangles, glass coatings, nuclear reactors, among other things.

Also, silver can be used to make water purifiers, wood preservatives, and currencies. This wide application of silver keeps its demand high in all seasons. So investing in it can protect you in a time of uncertainty.  

  • Platinum

Platinum is another rare metal any investor should consider investing in. This type of precious metal is 15 times rarer than gold. This makes it a highly sought-after precious metal. Due to its non-corrosive nature, platinum is used as a catalytic converter. Platinum can also be used to make laboratory equipment.

Unlike gold and silver, whose value keeps on rising in different economic situations, platinum behaves differently. For instance, during times of economic prosperity, its value tends to go high. And during economic downtimes, its value goes down. Though that’s the case, platinum can provide a complementary portfolio investment.

  • Palladium 

Palladium is another precious metal you can consider adding to your portfolio. Compared to other precious metals, palladium is the rarest metal. This makes it more expensive than all the other precious metals.

Though most investors rarely trade in palladium, you can consider giving it a try. Just like platinum, palladium is widely used to make catalytic converters, on top of its other uses.

What To Consider When Investing In Precious Metals?  

Though investing in precious metals can be the best option for investors looking to diversify their portfolios, sometimes it can be tricky and overwhelming, especially for anyone who hadn’t previously traded in them.

If you’re one of them, there are several things you need to know before you invest in precious metals.  Learning and understanding these things can help you become a successful precious metal investor.

  • Know The Type Of Metal To Invest In 

As you’ve read earlier, there are several types of precious metals you can consider adding to your portfolio. Though you can invest in either of them, your choice should depend on the demand and supply. This is because you may neither want to invest in a metal that’s low in demand nor one that’s low in supply.

Also, you need to compare the price volatility of different precious metals and avoid investing in a metal that’s likely to lose value.

  • Beware Of Scammers 

Just like any other investment, precious metal investment is full of scammers, and you need to take caution. Before you invest in precious metals, it’d be helpful to have adequate knowledge and skills needed to thrive. This ensures you’ve not scammed off your hard-earned money. So to ensure you’re on the safe side, be sure to learn to check the quality of the precious metals, such as their color and purity.

Also, you need to research to know the average market price of the precious metal you’re considering investing in. This helps ensure you buy your investment at the right market price so you can get the best value for your money. 

  • Consider The Form Of Investment 

There are several forms of investing in precious metals. Some of these forms include physical metals, stocks, exchange-traded funds, and precious metal IRAs. Investing in physical precious metals involves buying and storing them until their prices rise. This means that you must have a place where you can keep your physical metals.

On the other hand, an exchange-traded fund involves trading precious metals in the form of securities.  And precious metal stocks involve investing in companies that mine precious metals instead of investing in physical metals themselves.

Finally, investing in precious metal IRAs is where the IRA account holder keeps and trades precious metals through a precious metal IRA bank. Each investment has its advantages and disadvantages, so you need to do your homework to know the best form of investment that suits you the best.

  • Time Of Purchase 

Time of purchase is an important aspect when it comes to precious metal investments. This is because you may want to buy your metals when the prices are low so you can sell when prices are high.

While it can be difficult to time the market, you can consider investing a similar amount of money twice a month. Also, you can keep studying the market to help keep track of price speculations and trends. This can help you make a better choice when to invest in precious metals.

  • Know Where To Buy Your Investment 

After you’ve decided on the best precious metal to invest in, you need to identify the source for your investment. One of the best places to buy your investment is from online dealers. This is because online dealers can be found from any part of the world, and most of them can provide buy-and-store programs. This can’t be stressed enough, but be aware of scams. You’ll save yourself a lot of headaches and heartaches by making the due diligence to vet these dealers.

Why Should You Invest In Precious Metals? 

Investing in precious metals can be the best way to store and protect your wealth. While other investments could fail at any time due to economic distress and uncertainties, again, precious metal investments are always stable. Though that’s one major reason why you should consider investing in precious metals, these are other reasons to consider:

  • High Liquidity: When making your investment decision, it’s important to consider the highly liquid option. “Liquidity” means the ease of converting your investment into cash. While most other investments can’t easily be converted to cash, you can easily exchange precious metals for cash.
  • Portability: Another advantage of investing in precious metals is that they’re portable. This means you can literally move with them from one location to the other. So if you decide to store physical metals in another country, it’s easier to do so with precious metals. And because precious metals are traded in almost all parts of the world, you won’t be restricted when crossing borders with them. Either way, make sure to check customs laws to the country you’re entering, to avoid any misunderstandings.
  • Provides Privacy: Precious metal investments can provide you with a unique benefit of privacy that you can’t find in most other investments. When you invest in them, your information won’t be shared with any other person or entity. So where you store your precious metals and what you do with them is only known by you.
  • No Barrier To Entry: While you have to work with a broker or other third parties for most other investments, investing in precious metals doesn’t necessarily require you to work with a broker. You can decide to do it by yourself. You only need to identify the best place to buy your precious metals, and you’re good to go. Also, there’s no minimum amount of money for investment. You can invest any amount of money, regardless of how little you have.

Takeaway 

Though investing in precious metals can be the best way to diversify your portfolio, you need to invest wisely. This means that you must do your homework to identify the best type of metal to invest in and in what form. If you do so, you’ll become a pro in precious metal investments in no time.



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Daniyel Carlson
Daniyel Carlson is a Young Researcher in the field of Data Science & Analytics having research experience of more than 8 years. He has a Masters in Computer Engineering and currently serves as an Editorial Assistant in IGI Global, United States of America. Daniyel also holds honorary positions in the Associate Member of Institute of Research Engineers and Doctors, International Association of Computer Science and Information Technology, International Association of Engineers, Society of Digital Information and Wireless Communications.

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