The right way to grow one’s investment portfolio is to diversify it. This means investing in investment vehicles like stocks, exchange-traded funds (ETFs), mutual funds, real estate, and precious metals.
By having a diversified portfolio, you can balance it when the other investment vehicles are down. For instance, your portfolio will not be at a ‘loss’ if stocks are down because the other investments like precious metals are likely to be doing fine in times of the bear market.
When investing in precious metals, you may want to consider gold and silver this 2021 because of their potential to become more valuable in the future. You must learn why gold and silver are a good choice especially if you’re starting in precious metals investing.
Why Buy Gold?
Because of its history, gold is known to be superior compared to other currencies and commodities. Although it’s not used as a currency, people value it like ‘money.’ One reason for such is because it serves as a long-term store of value throughout centuries. For instance, you may have acquired gold around 2000 at USD$308 per ounce. If you sell it now, its price per ounce will be at USD$1,800.
Thus, the value of your USD$308 now has increased five times its original value. On the other hand, if you have saved it in your bank account, you can never reach that value. Even if you still have the USD$308 on hand, its value now is not as high as 20 years ago because of inflation.
With such, educating yourself about investing in gold now will not be a loss because you’re not only saving, but you’re also growing the value of your money. In the future, you may use it to buy goods, pay debts, or rely on it as your retirement fund.
Even if you choose to buy physical gold, you wouldn’t have to worry about it because time, water, and fire can’t destroy real gold. It’s also highly liquid, which means you can sell gold easily at any time. Wherever you go, people know the value of gold. Thus, you won’t have difficulty finding a buyer.
Why Buy Silver?
Aside from gold, investors also root for silver because it can outperform gold. Similarly, silver is a tangible and highly liquid commodity. When it’s tangible, it means that it can have opposite prices from bonds and stocks. As mentioned, if the market is down, silver and gold prices aren’t affected. Instead, their prices tend to go high.
Like gold, you can also use silver to retain the value of your money against inflation. In times of economic downfall, you can use silver bars or coins like ‘money.’
As for investment, silver tends to become more valuable because more industries are now using silver for manufacturing products from microcircuits to medical equipment and from batteries to glitzy jewelry. Most importantly, silver is most valuable in technological applications like the automotive and solar energy industry because of its high conductivity. Since both industries are rapidly expanding, imagine how much demand there will be for silver.
Investors see it as having higher prices in the future. That’s why more investors are buying silver, whether in stocks, bullions, ETFs, and other ways.
Key Challenges with Gold and Silver Investment
The future may seem lucrative for both gold and silver. However, like other investment vehicles, gold and silver investment also comes with challenges.
No Cash Flow
One of which is not producing cash flows, unlike real estate investment that allows you to earn monthly income from leasing your property. Although they’re good as an inflation hedge, silver and gold are still commodities that you cannot expect to get regular income. Because their prices can go high over other investments, they don’t quickly do so as it may take years. Thus, your money will sit there waiting for the silver and gold prices to go up.
Another is the transaction fees when you invest in precious metals. For instance, buying physical gold is not as easy as going into the department store and getting the gold or silver bars after paying the cashier. You need to have a middle man or a company when you plan to buy physical gold. These companies sell the gold and silver at retail prices after buying them at wholesale prices and fine-tuning them to investment-grade gold and silver.
Also, you may have to pay for the storage, security, and shipping costs for physical gold and silver. Even when you invest in ETFs, you need to pay administrative and management expenses of the funds.
Even with these challenges, the benefits you get when you invest in gold and silver still outweigh such difficulties. Especially if you’re investing long-term, you can buy gold and silver to fight currency devaluation. Also, if you have other sources of income, saving a part of them by investing in gold and silver may be more beneficial in the long run.
Ways to Invest in Gold and Silver
Aside from being safe havens, you can invest in gold and silver in many ways. Depending on your finances and goals, here are some of the ways you can invest in gold and silver to grow your investment portfolio:
Buying Gold and Silver Bullion
The most common way to invest in commodities is by buying gold and silver bullions. This is because many investors see this way as the best and most liquid way of acquiring money in case of economic collapse. You can easily take out your silver or gold bullions because you physically possess them.
Not only that, but you can either buy them in bar or coin form. Some coins contain quarter ounces, half an ounce, or one full ounce of gold or silver. As for bars, the amounts can range from 1-400oz.
If you plan to acquire bars and coins, you may want to check the dealer’s reputation to avoid being scammed. You can also check the state department of consumer affairs and online sources for complaints against such dealers.
If you don’t like to hold physical gold and silver or you want to avoid the costs of securing them, you may want to buy ETFs. By doing so, you can get indirect exposure to stocks of gold and silver mining companies. Or you can also buy ETFs that track the prices of silver and gold.
Like other ETFs, you buy shares in the fund from the issuing companies with gold and silver-related company stocks. The value will depend on the company stock value or the underlying price of gold and silver. Thus, you may want to buy shares from reputable ETFs.
The best thing about this is you can easily buy ETFs like what you do when buying stocks online. You only have to use your online broker and buy the ones you know can yield higher returns on your investment.
Again, since gold and silver don’t provide cash flow, ETFs can be a good way for long-term market timing strategies. As such, it’s recommended that you have 5–10% of this investment for your portfolio diversification. That way, you won’t have to compromise your financial budget if you’re aiming for cash flow.
Buying Gold And Silver Mining Stocks
Likewise, you may want to buy gold and mining stocks from various companies directly. In this case, you may have to be more diligent in researching the company you want to invest in because the failure or success of the mining companies depends on their operating performance. Hence, when the company fails to generate profits, the stocks you bought from them may be at a loss.
This is similar to buying regular stocks from different industries because the profits you earn from buying their stocks rely on its performance. You don’t have control over their operations, so you have to ensure that the mining companies you invest in are reputable in the industry.
When you buy gold and silver stocks from the right companies, you can enjoy the following benefits:
- With gold and silver stocks, you don’t have to buy insurance for them, unlike when purchasing them in bullions or bars. Since the stocks you own bypasss the risk of being physically stolen, insurance isn’t necessary.
- Also, you won’t have to pay for third-party storage companies or buy high-secured vaults to keep your physical gold and silver. What you only need when buying gold and silver stocks is an online portfolio to buy or sell them.
- Although you may have to pay some transaction fees, it’s not that expensive. So, if you trade your gold and silver stocks in the market via online platforms, you only pay a little.
- Most importantly, gold and silver stocks are also easily liquidated, just like your precious metals. Since you can do it online, you can sell them easily, just like regular stocks. No need to withdraw them or look for buyers as you trade the stock in the market.
Nowadays, there are many ways to grow and diversify your investment portfolio. This includes buying gold and silver bullions, ETFs, and stocks. Whichever you choose, you’re sure to gain from them over the long run as these precious metals are easily liquidated and more valuable as times pass by. Although you can invest in gold and silver jewelry, you may want to consider other ways to buy these precious metals.