Whether you’re just starting to diversify your portfolio or want to add an element of tangible assets, including some exposure to gold, silver, and other precious metals can make good sense. In this article, we’ll explore some of the key things to evaluate as you develop your strategy.
We’ll begin by discussing the time-tested reasons why precious metals have served as a prudent diversifier and store of wealth. From there, we’ll outline the different investment vehicles available so you can determine the best fit depending on your specific goals and preferences. Finally, we’ll end by emphasizing the importance of thoroughly vetting any dealers or storage providers you may use as part of your due diligence.
Why Invest in Precious Metals?
Precious metals can make sense as an investment for a few key reasons. First, gold and silver in particular have a long history of holding their value and even appreciating during periods of high inflation or currency debasement. When other asset classes may falter, these tangible assets have often acted as a stable store of wealth.
On that note, precious metals are also a good hedge against volatility in the stock market and shifts in the bond market. Diversifying a portfolio with some exposure to tangible assets like gold, silver, and platinum can help lower overall risk. This is because metals have traditionally had a low correlation to performance in other investments, like stocks. Their prices don’t always move in the same direction.
Another advantage of these tangible assets is that they are real, tangible assets as opposed to merely speculative investments. When you invest in physical gold, silver, or palladium coins and bars, you actually own assets with intrinsic value. That value comes from their use in various industrial applications as well as their long history as a currency exchange denominator across cultures. Demand from sectors like technology also helps maintain favorable long-term supply-demand fundamentals.
While past performance is no guarantee of future results, these tangible assets have served investors well for centuries as a store of value. Even if you aren’t trying to profit from short-term price fluctuations, their capital preservation benefits lend reassurance during extended bouts of market turbulence or fiscal uncertainty.
For these reasons, a strategic, balanced allocation to physical metals has long been viewed by many experienced investors as a prudent diversification and risk mitigation strategy worth considering.
Types of Precious Metal Investments
When getting started with precious metal investments, one of the first decisions is choosing the right vehicle for your goals and situation. The good news is that there are several options to consider. See for more insightful content on precious metals.
For those wanting direct ownership of tangible assets, physical coins and bars are available in popular sizes like 1 oz. gold eagles or silver maples. Buying your bullion directly allows you to potentially resell it later, if desired, without commissions. Just be sure to use a reputable dealer and consider secure storage since you’re fully responsible for the metals.
Another physical approach is purchasing precious metals certificates. These represent your stake in publicly traded metals held in a vault. The bank or dealer handles the storage logistics for a small fee. Redeeming the certificate for physical coins down the line is an option too, in most cases.
For a more liquid method suited to trading over time, you may prefer the stock market route. There are several precious metals-focused mutual funds and Yid exchange-traded funds (ETFs) that passively track commodity prices. This trade similar to stocks with potential for gains as prices rise.
Due Diligence on Dealers and Storage
Once you’ve decided what types of precious metals suit your goals best, it’s important to thoroughly research potential dealers and consider secure storage options as part of your investment plan. After all, you’ll want to feel confident that your new precious metal holdings are properly accounted for and protected over time.
When shopping around, pay attention to factors like a dealer’s reputation, pricing relative to transparency, and preferences for payment methods. Make sure any dealer you choose has been in business for years with consistently positive reviews, like the review of Provident Metals, to foster a safe approach. It’s also wise to confirm they have a physical office address despite selling online. When it comes to purchasing physical gold and silver, storage is another key piece of the due diligence puzzle.
Storing your tangible assets at home presents obvious security concerns, so using insured vault facilities is commonly recommended. Look for providers with top security features as well as flexibility if you may need to access or withdraw your metals later. Be wary of companies claiming storage is “free”, as there may be hidden fees.
Bottom Line
Developing a systematic plan that aligns with your risk tolerance and maintains an appropriate percentage of your overall portfolio in tangible precious metals, can help you achieve the diversification benefits they offer.
Whether you decide to hold physical coins and bars, opt for a stored certificate, or choose a professionally managed fund, the most important things are properly assessing your goals, diversifying among different metals, and always doing thorough vetting of who you ultimately work with.
Be sure to periodically rebalance as needed. Over the long haul, including gold, silver, and select other metals can serve as a prudent way to preserve wealth regardless of broader financial market fluctuations or world events.
