Table of Contents
Precious metals are some of the world’s oldest forms of currency. Did you know that gold has been a globally exchanged form of currency for more than 5,000 years?
That’s a long time, and precious metals still have significant value today.
There’s a whole investing industry surrounding them.
So if you’ve ever wondered about how to start investing why you should consider precious metal investing, here are some tips on how you can start and why you should start.
1. Precious Metal Investing: A Tangible Commodity You Can Hold
Precious metals are considered “commodities,” which indicates tangible, physical wealth.
On the other hand, you may be more familiar with stocks, another popular investment which are considered less tangible. Stocks are considered “equities” which is a piece of a company that the investor gets to own.
Precious Metals Investing vs. Stocks
Precious metals offer wealth you can physically access and hold. Investing with them is known as commodity trading.
This means that use goods like precious metals to purchase or produce other basic goods like namely jewelry and industrial products. You can put them in the same category as spices or silks, which were other basic goods and historical forms of currency.
Commodities like precious metals have what’s called a “spot price,” which indicates the immediate value (dollar amount, for example) of the metal. The spot price also indicates why precious metals are considered more tangible commodities than stocks.
While investors prefer to cash out stocks in order to hold physical cash, certain precious metals investments give investors access to the valuable metal itself.
With some stocks, investors aren’t entitled to a lump sum cash out until years into the future. By contrast, owning precious metals can be a more attractive investment.
2. Creative Ways to Invest
Investing doesn’t mean that you have to pour your money in one place and hope you get something back. There are creative ways to do large and small investments, especially with precious metals. Here are some of those ways.
Exchange-Traded Funds (ETFs)
Similar to investing in stocks, investors can purchase shares in companies that specialize in gold. These are called exchange-traded funds (ETFs).
These companies hold the precious metals in a secure vault. By investing in them, you can also track the spot price of those metals
ETFs are useful because they allow you to invest in gold without having to take physical possession of the metals if that’s what you prefer.
Keeping a physical inventory of something as precious as gold is comparable to walking around with large wads of cash. It gives you more spending ability, but it can be less discrete and a hassle to maintain.
Although you won’t own physical gold when you invest in an ETF, you’ll own a set of contracts with a value backed by the physical gold. ETFs also allow you to track the spot price so you can see the gold’s market performance in real-time.
Coins and Bars
Coins and bars are precious metals made for distribution in a physical form known as “bullions” which investors can buy for themselves.
They are a creative way to invest because you can buy, sell, or cash out multiple coins or bars at once.
One of the most significant differences between coins vs bars is the price.
Coins often contain a lower quantity of pure gold, but they have significant historical value since many are relics from time periods with standard gold currency.
Due to the extended restoration process that old coins require, they can be more expensive.
Futures are contracts that allow investors to wager the market success of specific precious metals and then buy or sell the metal-based on that information. These investments typically involve more risk with large bets and payouts or losses.
When you buy a futures contract and the value of a precious metal rises, you can earn a hefty profit for the rise in value.
If you invest in a futures contract but you predict a drop in commodity value, you can close the contract to avoid losing capital.
3. More Reliability and Accessibility
One of the main reasons people start investing at all is to safeguard themselves from economic crises and financial ruin.
Historically, precious metals, and particularly gold, hold more global value than cash and monetary systems with assigned values.
Since precious metals have consistently reliable value, investing in them is a good insurance policy against financial risk in other investing industries.
This doesn’t mean that you’ll make a profit every time you invest in precious metals. However, it does mean that these precious metals have a scarcity which makes their value inherently more reliable.
4. Investment Portfolio Diversity
An investment portfolio is a record of your investment history. It includes your previous investments like stock or real estate, for instance.
Investing in precious metals is a way to diversify your investments so that you have various multiple streams of income instead of just one.
If you stick to one method of investment, you may be putting all your eggs in one basket, so to speak.
Strategically placing investments to balance risk is an important part of the investing trade in general, but it’s particularly useful with precious metals.
This is otherwise known as “investment hedging” and it acts as a safeguard against economic crises that largely influence the stock and real estate markets.
Should you have assets in the stock market that perform poorly, investing in precious metals can supplement those losses.
How to Get Started with Precious Metal Investing
If you want to get started with precious metal investing, you should first ask what type of investment personally works for you the best.
Can you keep a physical inventory of your metals with bullions? If not, maybe investing in an ETF is a better option for you. Or, could you handle placing larger bets with a futures contract that has greater risk?
Like all investing industries, putting your money in precious metals comes with benefits and risks. It’s up to you to decide what fits your style and won’t expose you to any risks you can’t handle.
If you’ve learned a little something to help you out with your investing journey, share this article so it can help someone else with their journey!