At least a part of your portfolio should be devoted to investing in precious metals like gold, silver and platinum. The first two are the most popularly traded precious metals and are likely to yield good returns if managed effectively. But before you venture into this market, it is necessary that you know how to invest in silver and gold. Educate yourself well about the market in these metals before you invest.
Methods of Investing in Precious Metals
There are various ways to invest in precious metals like gold and silver. The safest way is to physically own the metal in the form of bullion, i.e. bars and coins. They have to be transported and stored and you will have to factor in the insurance costs. However, its value cannot be suddenly decreased by a declaration from the government.
A more popular way of investing in precious metals is buying gold and silver exchange traded funds or EFTs. These are certificates which say that you own a particular quantity of your chosen precious metal. They can be stored and traded easily, but they still represent a type of paper asset.
You can buy stocks or shares in companies engaged in mining of precious metals. Today, very little silver is mined in the world. So the emphasis is on gold mines. You need to keep a close track of the market as well as the local scenario at the mines themselves to safeguard your investments.
If you are confident of predicting the future movement of prices of precious metals, you can invest in the precious metals futures market. Here, you agree to sell a quantity of gold or silver at a specified date and pre fixed price. It can bring huge profit, but this type of investment is highly speculative in nature.
The Main Things to Remember when Investing in Precious Metals
Precious metals like gold and silver are the best safeguards against inflation. So, you should always keep at least a small part of your funds aside for investing in precious metals.
If you decide to invest in gold and silver coins, you need specialized knowledge. Many are collector’s items and their prices far exceed the intrinsic value of the metal. They are much more difficult to sell and a different set of tax laws apply to them. It is easier to buy gold and silver bars if you want to physically possess the metals.
Investing in precious metals will give you security, but not very high profit. Precious metals earn profit only when their price goes up, unlike other commodities which can produce dividends. The precious metal market is also quite volatile. So, they should not constitute more than 5% to 10% of your portfolio.
Whether you are buying bullions or certificates, be sure to check out the seller thoroughly because this market is not free of frauds. Online trading in precious metals has become common. But if you are thinking of investing in precious metals, it is better to engage professional investors through mutual funds to do the job so that you are always protected.