Investment managers are notorious for advising their clients to invest in precious and industrial metals to diversify and stabilize their portfolios. Successful entrepreneurs often find themselves considering precious and industrial metals investment as a way to grow and protect their wealth, but they fail to realize that there are several ways to do this.
Investing your money into gold, silver, platinum, palladium and other industrial metals can be a very smart way to handle your money, but before you buy into the first opportunity you see, take the time to learn the basics of the market.
Here is the most crucial information you should understand before choosing how to invest in metals:
1. Not all metals are categorized the same way.
Gold and silver are among the most popular metal investments but did you know you can also invest in other metal commodities? Metals used in manufacturing, like rare earth and base metals, are now becoming increasingly important due to high industrial demand. Therefore, they could offer good potential for asset diversification through a variety of trading vehicles including stocks, futures, options and exchange-traded funds.
2. There are various ways to invest in metals.
You can buy stock of the metals themselves, invest in mining companies or even invest in security companies that store precious metals like gold and silver. You can also purchase an Exchange-Trade-Fund, which is similar to buying a share of stock except that you’re actually buying a share of a fund. That fund contains various stocks, bonds, options and futures.
3. Precious metals need to be stored securely.
This probably sounds obvious, but are you prepared to keep your gold or silver safe at home? If not, you can usually buy storage from the company that sold you the physical metal, but costs are steep. Mike Clarke, President of Diamond State Depository, says that an account valued at $50,000 would generally be charged an annual storage fee of $375.
4. Physical metals come in two forms.
When you buy physical stock of precious metals, you can choose between bullion or coins. Bullion is precisely-weighed bars, stamped with information about the weight, purity and source of the metal. Coins, on the other hand, are collector’s items that may differ in value according to rarity and popularity.
5. Experts disagree on whether to safeguard your wealth with industrial or precious metals.
History shows that gold and silver are always going to be valuable, even in times of war or recession. Drawing on this information, there is a school of classic economics that insists, “If disaster strikes, gold is the metal we will revert to if paper-money, and the system that supports it, no longer exists.” The modern approach posits that industrial metals such as platinum and palladium will be more valuable in an economic breakdown because they are used to manufacture high-tech devices and machines.
6. Precious metals aren’t just for jewelry.
Just because gold, silver and platinum are popular for creating jewelry doesn’t mean they have no other purpose. All the so-called precious metals are used inside of computers, which in turn are used for everything from cellphones to space travel. This functionality boosts the current value of gold, silver and other metals.
7. Some precious metals may be subject to taxation.
If you purchase bullion or coins, you might need to pay tax if and when you sell them for a profit. If you trade often, the government may classify your investments and sales as a business, and tax you based on business tax. Check with your local tax office to find out exactly how national laws affect your physical stock.
8. Not every vendor is trustworthy.
Under no circumstances should you put your trust and money in the hands of anyone out there selling gold coins or stocks in platinum mining companies. Read reviews, talk to professionals, and ask family members for advice about reputable vendors that you can check out for yourself. If anything seems suspicious, run far away!
9. Physical stock needs to be insured.
At least, that is if you don’t want to risk losing your entire investment. You may be able to buy insurance through the vendor or the storage company; otherwise, you can look for good rates through other non-affiliated companies.
10. Even historically valuable metals can suffer in the short term.
Most metals are meant to be long-term investments that protect the investor’s money from short-term dips in other markets. That doesn’t mean, however, that gold, silver or palladium is going to retain the same value day in, day out. It will rise and fall just like anything else you invest in—the difference is that over the course of a lifetime, these metals should more or less retain their original value.
Like the Professionals Always Say, Diversity is Best
If you aren’t sure whether to focus on precious metals or industrial or manufacturing metals, go ahead and invest in both. The point of putting money into metals is to diversify your investment portfolio and keep your money safe from market fluctuations, so it follows that investing in both types of metals is for the best.
You can easily invest in industrial metals like steel, iron, copper, aluminum, lead, nickel and tin. These are available to invest in the same way as gold, silver and other precious metals except physical stocks.
What’s Best for You?
Like any investment, metals investment should be carefully considered before money is handed over. In addition to researching your commodity or precious metal thoroughly, you need to take your investment horizon, risk aversion and many other investment criteria into account before making any decisions. Seek qualified investment advice before making any decisions you are unsure about.