Are you an investor looking to diversify your portfolio? If yes, then you’ve visited the right site. Diversifying your securities can helps reduce risk while increasing your rate of return. While you may decide to invest in other securities such as mutual funds, stock, and bonds, investing in precious metals shouldn’t miss a place in your investment portfolio. Investing in precious metals can be an excellent way to minimize your investment risk. Also, their returns are amazing.
Most people find it challenging to invest in precious metals because they lack basic knowledge about precious metals. Even with a lot of information on the internet, sometimes you might get confused because you don’t know which information is helpful and which isn’t, especially if you don’t have any past knowledge about precious metal investment.
With the right information, you should find it easier to make the right decision. That’s why working with firms like Oxford Gold Group and other reputable firms can help make the right investment decision. Such firms are experts in precious metals, and consulting them will ensure you get comprehensive information about your investment.
This guide has all you need to know about investing in precious metals, including what precious metals are, the importance of investing in precious metals, and much more. Read on!
What Are Precious Metals?
Unlike bonds and stocks, precious metals are commodities which means that they can be bought and sold. These commodities are scarce, and they have a high economic value.Investing in these metals is a great way to protect yourself against risks. These types of investments are considered to be the best hedges against inflation and future economic uncertainties. All other investments can easily scramble because they aren’t stable.
What Types Of Precious Metals You Can Invest In?
While there are several precious metals in the market, gold, silver, palladium, and platinum are the most traded metals. Every investor is looking to invest in these metals, and you shouldn’t be left behind. These metals are explained below.
Gold is considered the king of precious metals. It’s one of the most secure investments you can ever imagine of. One benefit of investing in gold is that it’s not affected by the demand and supply forces of other investments, which makes gold strive in all economic situations. Also, the price of gold is always stable even during an economic crisis.
Silver is another metal to consider if you’re looking to invest in precious metals. Like gold, it also has a high value which also makes its demand rise. Its constant growth in demand makes it one of the best investment choices because returns are always guaranteed. Silver is highly demanded in the electrical and circuitry sector.
Though most investors don’t consider this type of metal because of its scarcity and the high price attached to it, it’s worth giving it a try. This metal is used to make jewelry items. People like platinum jewelry because they don’t cause allergic reactions and rashes to the skin. So, platinum is a good investment to consider because of its demand.
Compared to the other metals, palladium isn’t that popular, but it has several industrial uses, especially in electronic and industrial products. Palladium is also used in jewelry, medicine, and dentistry. The major suppliers of palladium are Canada, the United States, Russia, and South Africa.
Palladium can be combined with gold to form a stronger metal than white gold. This metal was first used to make coins in the year 1967 when the government of Tonga decided to make palladium coins in remembrance of King Taufa’ahau Tupou IV colonization
Why Should You Invest In Precious Metals?
Precious Metals Are Accepted Worldwide
Unlike other trading assets that are accepted in a few countries, precious metals are traded in all parts of the world. Another benefit of trading precious metals is that even if their prices fall in one country, you can trade them in other countries where their prices are high.
They Are Economical To Buy
Precious metals are the most popular metals in the market, which makes them easily accessible. There are many platforms where you can buy precious metals, including market dealers, banks, and bullion traders. So, with adequate knowledge, anyone looking for precious metals can easily access them.
Apart from their availability, precious metals are economical in terms of price. You don’t have to own the whole country to afford them. You only need a small amount of money to get you started in the precious metal investment.
Also, precious metals give you investment options to choose from. As stated earlier, there are different types of precious metals such as gold, silver, diamond, etc. This allows you to have investment options in the event you’re not able to invest in your priority option. For instance, if the price of gold is high and you find it difficult to invest in gold, you can go for other cheaper options like copper.
They Are Highly Demanded
For many years, the demand for precious metals has steadily been increasing. Despite economic instability caused by events such as civil wars and natural calamities that affect the economic status of different countries, their demand continues to rise compared to other investments. Their stable growth in the market makes them one of the best ways to invest your money.
What makes the precious metals to be highly demanded is their use. For instance, gold and silver are used in the jewelry industry. So, many jewelry manufacturers will want to purchase gold to manufacture precious items like chains and rings. Their high demand makes their prices go up, which allows you to make huge profits.
They Are Highly Liquidity
Liquidity is one of the most factors to consider when making an investment decision. Liquidity means that these metals can easily be converted to cash. Most investments in the world can’t easily be converted to cash. However, investment in precious metals can allow you to convert your investment into cash quickly. Once you’ve your precious metal coins, you only need to exchange them for cash. Trading in precious metals is the simplest and the quickest way to get cash.
How Can You Invest In Precious Metals?
There are several ways you can consider when investing in precious metals. Some of those ways include bullion, exchange-traded funds, IRAs, futures, and options.
Bullion is the best option if you’re looking to invest in precious physical metals. It’s the most common way for most people use to trade their precious metals. People like trading in precious physical metals because they can easily be transferred, and you can buy any amount depending on your financial muscles.
Exchange-traded funds are another popular option to trade precious metals. Just like a mutual fund, exchange-traded funds are marketable securities, especially when offered in the form of precious metals like gold or silver. Though they have no physical representation, exchange-traded funds are also easy to purchase and sell, and you can invest any amount.
If you consider investing some of your retirement funds, then self-directed IRAs should be your best option. IRAs allow you to invest in precious metals, private equity, or real estate. That gives you a wider option to choose from.
Futures And Options
The last option is futures and options in precious metals. Though this is a risky option, with adequate knowledge and information, you can earn high returns.
What Are The Common Precious Metals Investment Misconceptions?
As noted earlier, as an investor looking to diversify your portfolio, you’re likely to come across a lot of information about precious metals investment. Some of the information might be true, while others are false and might mislead you. This section aims to dispel some of the most common precious metals investment myths you’re likely to encounter.
Precious Metals Are Only For Wealth Investors
Most people believe that you must be a tycoon to invest in precious metals, but there’s no restriction to who can invest in precious metals. This investment is suited to everyone, even the small investors who have little capital. Unlike other investment securities like bonds, most precious metals are suited to any investor regardless of their experience.
You Can’t Make Profits Because Banks Controls Precious Metal Prices
There have been some instances where banks have tried to regulate prices of precious metals, but their efforts have gone to drains. Their actions don’t affect the profit of your investment in any way. Like any other investment, the prices of precious metals are controlled by the force of demand and supply.
When the demand for a certain metal goes up, its price rises and vice-versa. The price will keep changing until it reaches the equilibrium where the price is determined. So, at some point, you might make profits or losses regardless of whether you’re a small or a big investor.
Precious Metals And Stocks Are Inversely Correlated
Most people believe that when the price of precious metals goes up, the price of the stock goes down and vice-versa. While this might be true in most instances, there’s no direct correlation between the two investments.
For example, taking gold as a case study in 1993, the gold was up by 17.35%, and stocks were also up by 9.94%. Also, in 2000, the gold was 6.26%, and stocks were down by 9.94%.
As you’ve seen, precious metals offer an effective way to diversify your portfolio. The trick to achieving success with precious metals investment is to have the correct information before making the final decision of precious metals investment.