Gold and silver have been considered precious metals for centuries, from ancient civilizations until now. Today, we use them for jewelry and other objects as symbols of wealth and status. One other way that we make the most of their value is through investment.
If you’re thinking of adding precious metals to your portfolio, there are a few things to consider first. In this detailed investing guide, we look at the options of gold or silver, how to invest, and considerations for buyers. Keep reading to explore the potential benefits of precious metal investment.
Which Precious Metal?
Of all the precious metals, gold is the most common investment and the first option that comes to mind when people look at this industry. However, there are other choices, and silver is one that many people consider once they understand the differences between them.
Of course, they aren’t mutually exclusive. You can invest in both. Just remember that you shouldn’t store them together as they react and can tarnish. Your needs and budget will determine how you proceed, but this guide will help you make an informed decision.
Gold is the top choice for a reason. It doesn’t corrode and is easy to work with, which is why it’s a popular material for coins and jewelry. The price of gold depends on supply and demand and the perception of value by the market.
Typically, the prices aren’t particularly volatile. This precious metal is seen as a long-term investment. It’s also thought of as a safe haven buy, as trust in gold goes up during times of uncertainty. It means that as interest rates increase and other stock prices sink, gold rises.
The price of silver can be around two times more volatile than gold. While it’s also used for jewelry and coins, around half of all silver is used for industrial purposes, including in technological devices. It has the ideal attributes, including thermal conductive ones, to make it useful in switches, smartphones, and photovoltaic cells.
The price of silver depends more on the economy. Unlike gold, it’s more likely to increase when times are good and production increases. However, silver is usually cheaper than gold, making it more accessible to investors with limited budgets.
Ways to Invest
Precious metals are a great way to diversify your portfolio, especially if you invest in both at the same time. However, there are different ways to buy gold and silver. Each has different considerations, benefits, and risks. We’ll explore your options below.
You can invest in precious metals as physical assets. Usually, they come in the form of coins or bars. There are different weights and designs. If you want gold or silver that you can access in case of a currency collapse, you might consider this option.
The primary considerations when choosing this option are insurance, security and storage. You can pay a broker to store and secure them, use a safe deposit box, or purchase them as part of an individual retirement account (IRA).
For the first option, you’ll need to consider the cost. For the second, there’s a cost and also the factor that gold and silver should be stored separately. If you put your investment in an IRA, remember that only certain types are accepted.
An exchange-traded fund (ETF) that deals with commodities is another option. In this case, you’re investing in a fund that owns the silver or gold. It’s a convenient method, as you don’t need to consider storage or insurance, and it’s relatively easy to liquidate your assets.
You can explore different funds and prices, and choose the best-performing option. On the other hand, if you want a physical asset that you can access, an ETF won’t deliver that.
Another indirect option for investment is through stocks in companies connected to precious metals. It could be mining, exploring, or refining. You’ll need to choose the company in which you want to buy stocks and decide how much to invest. As with ETFs, you won’t have access to gold or silver as a physical asset, but liquidation is fairly quick.
This route is tricky for the average investor. It requires knowledge of the market and how mining stocks are valued. To get around this, you could choose a mutual fund that has a manager and holds portfolios of miners.
Digital Precious Metals
There are now also online marketplaces for buying and selling digital precious metals. Some investors perceive them as the best of both worlds, bringing the advantage of physical assets and of ETFs.
You can buy and sell as needed, including getting price alerts, which means you can move with fluctuations in the market. The platforms also allow you to take physical possession of your gold and silver when you want. It saves you from long-term security, insurance, and storage costs.
Portfolio Allocation and Cost
Now that you know which precious metal or metals you’re choosing and you’ve got an idea of which investment methods to choose, you’re almost ready. The next step is to consider the reasons for investing, the risks, and the benefits.
For gold in particular, the investment is one that will help you avoid overexposure to other particular asset classes. If you’ve mostly invested in stocks or property up until now, you might want to consider diversifying.
Gold is an excellent long-term investment option that helps hedge against other potential losses in uncertain times. Investment and gold experts agree that an allocation of around 2% to 10% of your portfolio is a sensible way to diversify.
You’re One Step Away
You have everything you need to decide whether to invest in gold, silver, or both. Plus, you know the advantages of coins and bars, putting it in an IRA or choosing a fund. Lastly, you can look at the current prices of gold and silver and consider your portfolio allocation to determine how much you can spend.
The final step is to use your newfound knowledge and invest.