While you’ve likely heard that investing in precious metals is a wise idea, you probably haven’t considered longevity or the investment. Many factors need to be considered at the time of purchase. It seems that many investors are torn on whether or not investing in precious metals is a profitable venture. Some investors believe portfolios should never have gold or silver allocated. Others refuse to trust the global economic system, keeping their investments entirely precious metals.
Whether you’re looking to diversify your portfolio or simply want to know if you’re making a wise investment, here are the benefits and drawbacks of precious metals as an investment.
Benefits of Investing in Precious Metals
Precious metals like gold coins will hold their purchasing power over more extended periods of time. This is independent of typical inflation rates or devaluation, meaning metals won’t depreciate with the dollar over time. There’s virtually no credit risk to purchasing precious metals, but they can be bought and sold quickly within the market. Almost every jewellery store or bank will have products available (many with a certificate of authenticity).Investing in precious metals requires minimal maintenance, unlike real estate investments that require monthly upkeep and repairs. Most investors aren’t forced with liquidation, as gold and silver are always in demand. Passing these items on to future generations isn’t difficult, making them easily transferable.
The downfall of Precious Metals
One of the most significant downfalls of investing in precious metals is the storage requirement. Long gone are the days of simply burying bricks of gold in the backyard, requiring most items to be stored with a reputable company. Always look for a storage facility that offers insurance and has a trustworthy reputation. For those wanting to receive direct investment, coins and bars can take physical delivery, but mark-ups are expected. It’s important to know that most bullion ETFs don’t permit taking physical delivery for precious metals unless you’re an Authorized Participant.Liquidity is also a critical consideration for investors. At the same time, ETFs and closed-end funds can trade on the exchange. It can also be bought and sold throughout a trading day, making it reasonably liquid. For those holding physical bars and coins, the process can be cumbersome. Physical metals aren’t as easily bought and sold, making it challenging to turn assets into cash.
While the market seldom influences the value of precious metals, it’s crucial to determine the initial and ongoing costs connected with coins, bars, closed-end funds, or ETFs. These costs can influence bankroll, which can eat away at your investment’s return.
What Precious Metals to Invest In?
Silver and gold are the most popular precious metals for investors, but they’re not the only option. Others include platinum metals and palladium, both of which are very valuable. While the autocatalyst market drives palladium and platinum, they’re occasionally favourable with jewellers too. They are considerably rarer than silver and gold, making the supply more sensitive to economic changes.Silver is classified as a hybrid metal, with physical properties used in currency and technology. Nearly 50% of the annual supply is industrial. It is an affordable option to gold, making it a valuable tool for diversifying your portfolio.
Finally, gold remains unparalleled in value. It is an alternative form of currency and is a monetary metal. This metal is considered a safe-haven asset to hold during an economic downturn or geopolitical upheaval. Historically, gold has proven an effective diversification tool for portfolios. Controlling one-sixth of the global investable gold stock, central banks are able to diversify foreign currency reserves. It is secured through physical pieces (whether bars, jewellery, or coins) and can be held through generations.
