Investing in materials like gold and silver is no longer such an exotic form of investment.
Just like certain stocks and bonds seemed safe for investing your money before 2008, precious metals investing has since become seen as one of the safest and most effective methods for investing. There are a variety of smart ways you can get started with investing in materials like gold, silver, platinum, and palladium. But, as with any form of investment, it’s important to understand the process of investing in precious metals so that you can build the best investment strategy for you.
Decide Your Investment Goals
First, it is important to consider what goals you have for investment. Precious metals investing can be effective for both short- and long-term gains, but planning for either requires different investment strategies.
For long-term profit, it’s important to have a safe balance of assets in your portfolio. A traditional approach requires a diversification of paper assets like stocks, bonds, and cash. Now, however, investors are adding investment in the other asset classes: precious metals, real estate, collectibles, and commodities.
Short-term profit requires a much more active investment strategy. In order to have the right balance of precious metals invested within that segment of your assets, it’s important to analyze the short-term outlook for each metal and understand which are likely to perform best in the immediate future.
Do Your Research
Not all precious metals perform the same over time, so it is important to understand the factors driving the value of each metal.
Gold tends to be the safest investment, as it has demonstrated its ability to hold value for thousands of years. It has dropped slightly from its record prices from a few years ago, but it is still at much higher levels than it was a decade ago. Prices typically vary based on demand and sentiment, and investors are currently high on gold as a way to protect their money.
Silver, on the other hand, has been used as currency for millennia but is still volatile because of shifts in demand from the industries that use it most. Platinum is coming into popularity for its aesthetics and its uses in medical equipment, electronics, and auto parts, although patterns indicate that it performs slightly worse in difficult economic periods. Palladium appears to be on the rise, as its use in auto parts has boosted the market tremendously.
Pick Your Investment Strategy
There are a number of strategies for precious metals investing, so understanding the implications of each investment possibility is an important step for all investors.
The easiest and most common form of investment is purchasing quantities of bullion and coins. This allows investors to have tangible quantities of the material, and both tangible forms come with different benefits and drawbacks. Bullion comes with low premium markups and safe long-term investment, while coins offer better liquidity in the short term.
Another way to invest is to buy into a mutual fund, which allows you to assess your risk tolerance and choose a fund that suits your tastes. Other investors put money directly into mining company stocks.