When confronted with the subject of investing, most people’s minds automatically turn to stocks, bonds, money market accounts, and other such products. However, there is a whole world of investing that is less reliant on the state of the stock market: precious metals. At the forefront of the precious metal market, of course, is gold, but there are other options to consider, including platinum, silver, and palladium. These valuable alternatives to traditional investments provide a shrewd strategy for protecting wealth from the instability of the ever-changing economy. Additionally, unlike other investments, all forms of precious metals are tangible, vanquishing doubt about the value of the asset. Still, as with all investment opportunities, there are some crucial details to understand about precious metals.
Gold and other precious metals have signified wealth for centuries. In ancient cultures, gold was used to craft fine jewelry and craft the earliest forms of money. Although countless years have passed since gold’s first use, it still holds a strong fascination for virtually all cultures and civilizations.
Since the most recent economic down turn, there has been a lot of conversation about investing in gold and other precious metals, leaving many to ponder the contents of their own investment portfolio. On the television, radio and in magazines, there is no shortage of ads proclaiming the value of these metals and reminding everyone that while the values may fluctuate, gold, silver, platinum, and palladium have never been worthless. Furthermore, these same ads insist that paper money is undependable and if the economy continues at its current pace, many hardworking people stand to lose everything. Whether you believe this is all credible or a mere media exaggeration, it is difficult to argue with the logic.
What metals should you invest in?
By far the most popular and well-known precious metal, gold seems to get all of the attention. However, the other three: palladium, platinum and silver are all valuable.
Prices for all of these metals have risen consistently in recent years, as demand has increased around the world. Although most people associate these metals with bullion, coins or jewelry, they are widely used in industry. Thus, India and China play a key role in their demand.
Critical to the electronics industry, gold is used to manufacture components of technological items. Gold is not only anti-corrosive, but also an excellent heat shield and a superior electrical conductor.
Conversely, platinum is used in the manufacture of computers, automotive parts, as well as medical equipment. Additionally, palladium, which is much softer than platinum, is also used in automotive parts, such as catalytic converters. Palladium can withstand extreme temperatures and oxidation better than other metals, not to mention that its high conductivity enables it to sometimes be used instead of gold for assembling electronics. Palladium is also handy for processing raw materials, water purification systems, fuel cells, as well as refining and purifying oil and natural gas. Clearly, there is more to precious metals than jewelry and coins.
First, why invest in precious metals?
Based on the economic woes of the U.S., Greece and other developed nations throughout the world, precious metal investing is gaining popularity with investors big and small. So, should everyday people be investing in precious metals and how does the little guy get into the precious metal market? While their reasons may vary, most investment experts agree that the best financial planning includes portfolio diversification, including a generous percentage of tangible assets, such as precious metals.
Instability in the Market
The world’s financial market is an inconstant place. Regardless of what type of investments people choose, there is no way to predict their actions from one day to the next. In fact, prices on stocks and bonds, commodities and even the precious currency that virtually everyone, around the world has come to rely so heavily upon change throughout the day. These changes, however dramatic or insignificant can result in financial woes for everyone from big businesses to the smallest consumers. As such, the only way for an investor to protect himself and his family’s financial future from an unexpected and potentially cataclysmic financial event, such as a stock market collapse, is to acquire a diverse investment portfolio.
Intrinsic Value of Investments
An investor may have numerous accounts or stock certificates in his portfolio, but if their intrinsic value is not close to the amount of his original investment or the value he believes it to be, he could face severe financial problems. Countless financial analysts and experts speculate that money invested in mutual funds and the stock market may be significantly overvalued. In past scenarios, such inflated values have been corrected, forcing investors to re-evaluate their investments. Conventionally, gold and other precious metals have been a leading and attractive asset in times when the market was less than satisfactory. One of the exclusive asset classes of investments that is solely owned by the primary investor, precious metals are exempt from the actions and miscalculations of others.
Potential Inflation
The U.S. government has begun inflating the economy with increased spending and relaxed monetary policy in attempts to combat a second recession. However, in the 1970s, as inflation reached all-time highs due to similar inflation, precious metal prices continued to rise, thereby proving their strength against inflation and value as assets.
When most investors begin considering precious metals, they inquire about the method of investing. Precious metals can be procured in the form of national coins and bars, also known as bullion, or there are other options, such as the gold backed IRA. It is perfectly acceptable to simply buy bullion, although coins seem to provide better conveyance and universal handling for many people. Moreover, coins are recognized globally as currency and therefore easily traded in a market setting, as their value is typically easily defined, while the value of a bar must be calculated by its content and traded to a willing recipient. Additionally, due to their size, coins are typically easier to accommodate than bulkier bullion. This often gives investors the option to store their precious metal investments in the privacy of their own homes. However, it is important to note that precious metals cannot be traced if stolen. Thus, whether an investor chooses bullion or coins, he should keep it in a secure location, such as a safe deposit box or a safe. Investors should always take care regarding who they share the knowledge of their investments with, but the concern becomes significant when dealing with assets that can so easily transfer from one person to another.
For investors who are not comfortable keeping such valuable assets, precious metals may also be owned via certificates, which allow investors to own specific precious metals without the need to store them. To discover more on the benefits that are possible by investing in gold, platinum, silver, or palladium, visit a reputable company, such as Monex.com. This company has been using their knowledge and experience to help investors understand existing market conditions for years, so they can make wise decisions about precious metals and how to incorporate them into an investment portfolio.
Before investing in precious metals, it is a good idea to do some research and learn about precious metals and what makes them unique, as well as what details or flaws in coins and bullion can affect the buying and selling price. As with precious stones, quality is vital; imperfections, condition and even the design of the piece can drastically impact its value.
Another issue that is often misconstrued by amateur investors is the value of jewelry. While family heirlooms can be extremely valuable, it is best not to think of precious metal jewelry as an investment. Jewelry is made from the same material as bullion or coins, but the value of a piece of jewelry will be at the mercy of the fashion industry, which can be more volatile than the stock market. Additionally, it can be difficult to determine cost versus value. In a retail setting, there can be a markup of 50 percent or more than the wholesale price of a piece and the same markup or more may have been added to the manufacturer’s price by the wholesaler, thus a necklace or ring that contains $150 of gold may have a retail price of $1500 or more.
Investing in precious metals can be one of the safest investments, after all, gold bullion never declared bankruptcy, ruining the financial lives of countless investors. Still, their prices can fluctuate considerably, just as other investments. As the old adage says, ‘don’t put all your eggs in one basket.’ No one should rely completely on precious metals; most analysts recommend that precious metals make up no more than 10 percent of an investor’s portfolio.