Gold and silver are highly valuable commodities, and they can make great additions to your investment portfolio. Many investors overlook the benefits of investing in these precious metals, but they have some unique benefits that you won’t find with stocks or other more traditional investments. Here are some of the hidden benefits of investing in gold and silver, as well as how you can get started.
- Their status as a physical commodity minimizes risk to an extent.
Another reason why gold and silver can make such great investments is because they are physical commodities, as opposed to stocks, bonds, mutual funds, and other investments that are financial concepts. Since they are a physical commodity, they will always have an inherent value to some extent. Their value has never dropped to zero, unlike some other types of investment assets.
Precious metals are also a relatively secure asset because of their status as a physical commodity. They aren’t susceptible to hackers and other cyber criminals. Of course, you’ll need to make sure you’re storing your precious metals safely to see this benefit.
- The limited availability of metals keeps their pricing steady.
While the price of gold and silver can go up and down with time, there are a number of different factors that help to keep their value relatively stable regardless of current events. Gold and silver are both metals with limited availability and consistent international demand. This means that they aren’t going to have the dramatic fluctuations that you would see with other types of investments.
- When markets and currencies fluctuate, metals are a reliable option.
Investing during uncertain economic times can feel very overwhelming. In 2020, the COVID-19 pandemic and other global events led to a massive economic crisis. Stocks, ETFs, and other mainstream investments have seen dramatic fluctuations. It’s been over six months since the initial crash, but many stocks have still not returned to their pre-pandemic levels.
This isn’t the case with gold and silver. Historically, investors have always turned to precious metals when markets have been uncertain, and that’s held true this year as well. Gold has seen a substantial year-over-year change of almost 23 percent. Silver has also performed incredibly well this year, hitting highs that haven’t been seen in seven years. Silver also saw 60 percent growth in just the third quarter of 2020 alone. Although there’s a chance the bubble could burst, current demand for these metals makes that seem unlikely. For those looking for a safe investment right now, gold or silver could be the right choice.
- They’re a great way to diversify your portfolio.
Precious metals are also a very effective way to diversify your investment portfolio. Having a diverse investment portfolio helps to minimize your long-term financial risk. When your portfolio contains a number of different investments, you’re far less likely to lose money in the long run than if you just invested in one asset. If one of your assets does tank for any reason, a diverse portfolio will likely balance that out with gains from other assets.
Precious metals are particularly effective for balancing out your portfolio because they tend to run counter to the trends of the stock market at large. When stocks and indexed funds start to fluctuate, many investors move to gold or silver as a way to protect their money. This drives its value up, and could compensate for losses elsewhere in your investment portfolio.
- Metals are an effective hedge against inflation.
For investors that are worried about the negative financial aspects of inflation, precious metals are a strong investment opportunity. This is because the price of precious metals tends to go up in times of economic uncertainty. Precious metals don’t typically fluctuate in price as much as other investment vehicles, such as stocks. Investing in precious metals is a good way to protect your assets from losing value as a result of inflation.
- Gold and silver don’t require third party backing or management.
If you buy your precious metals directly, you can manage and eventually sell them on your own. While there are price standards for gold and silver, they don’t require backing from a bank or other third party. This could be an advantage for those who are looking to invest without the strict requirements of larger markets.
What To Consider When Investing In Gold and Silver
There are a few different ways to invest in precious metals like gold or silver, and you’ll need to decide which one makes the most sense for you. The first is to invest in bars of these precious metals. Many people like this option because it gives you more control over your investment once you’ve made the purchase. You’ll be able to see the quality of your investment in person, and you can choose to store it however you see fit.
However, there are some challenges that come with this approach. The biggest challenge is ensuring that you have a fully secure place to store your gold or silver. Since these metals are so valuable, you’l need to be fully confident in how you store them to mitigate the risk of damage or theft. It’s also important to note that precious metals can require ongoing maintenance, and you’ll need to make sure you are purchasing them from a reputable dealer to avoid problems in the future. It’s also important to note that the process of selling a bar can take some time. This means that you won’t be able to sell it quickly in a financial emergency. However, when you do make a sale, it can be very lucrative.
Another way to invest in gold and silver is to purchase coins made out of these metals. This approach has many of the same benefits and risk factors as investing in metal bars. You’ll need to make sure you are storing the coins securely and maintaining them so they don’t lose any value. Maintenance for coins can be slightly more difficult because they require more detailed cleaning and upkeep. You’ll need to research the different types of coins thoroughly before purchasing to ensure that you understand each individual coin’s value and how that could change over time. Coins have the benefit of being more accessible and easier to sell than bars. This makes them more liquid in a pinch, and they’re also much easier for new investors to start with.
If you don’t want to invest in gold or silver physically, you might also consider investing in precious metals ETFs, or exchange-traded funds. These are funds that are tied to the price of these metals and are traded using a normal brokerage account. The advantage of investing in these ETFs is that it is very easy. You can invest in them using the portfolio you already have, and if you don’t have one set up, it’s easy to do so using apps like Robinhood or Webull. They’re very accessible, and there are several different ETFs to choose from. ETFs are also very liquid, meaning you can sell your shares of them when you need to without much difficulty.
The disadvantage of using ETFs is that you won’t have access to the physical gold or silver that you’re investing in. They are also controlled by the market in a way that physical metals would not be. ETFs are generally better for those who want to dip their toes in the water of precious metal investing, but aren’t quite ready to commit fully.
Gold vs. Silver: Which One Should I Consider?
Both gold and silver make great investments, and the process of investing in them is very similar for both. However, there are some slight differences between the two that are worth considering before you invest your money.
Generally, the price of gold stays a bit more stable than the price of silver. It’s more expensive, but it’s also usually easier to sell and is less likely to experience dramatic fluctuations. Silver is used for a number of industrial activities, which means that its price can go up and down more during market downturns. However, it’s more affordable and has the potential for great profits if your investment is timed well.
Both gold and silver are great investments that many people don’t consider when building their portfolio. Their price patterns are much different than traditional investments like stocks, so they’re a particularly intriguing option for when the market is experiencing a downturn.
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