Every investor desires to have a good return on investment (ROI). With the existence of several investments, it can be a bit difficult to settle for one. However, one rule of thumb in choosing an investment is viability, especially when compared with the risks attached to such investments. The existence of risks in investments has led to the diversification of portfolios by investors.
As an investor, one way to diversify your portfolio is through investments in precious metals. Precious metals are rare metallic elements of very great value. These metals neither wear out nor corrode; instead their worth keeps on increasing. In time past, they were used as currencies and pieces of jewelry. Today, these precious stones have different applications in various industries. Since they are considered a source of wealth, investing in them has always proven to be a profitable venture.
There are different ways you can buy these precious metals like silver gold, and platinum. There are precious metals investment companies that you can work with if you have decided to invest your funds in this area. However, you will need to go for a reliable company to ensure the security of your funds. You can check out Indigo Precious Metals for more information on the subject.
Now, read on to learn more about the different types of precious metals available, how to buy them, and factors to consider when purchasing them.
Types of Precious Metals
Generally, there are four types: silver, gold, palladium, and platinum. The following are what each of them entails:
Silver is a hybrid metal. It can serve different industrial applications due to its anti-bacterial, malleability, and conductivity properties. It can be used in batteries, water purification, and dentistry. It also served as photographic films in the advent of the digital camera.
Since silver’s value is highly demanded, investing in it is profitable. The only downside of this investment is price fluctuations. The price of this valuable metal is always affected by industrial demand. Having more than one metal in your portfolio as an investor can reduce any risk these fluctuations could cause.
Gold is known for its conductivity, durability, and malleability. This metal of value has different industrial applications in electronics and dentistry. In history, Gold was used as a means of exchange and a base for making currencies. Today, its value has remained the same.
This metal is a safe asset that many investors look up to during the volatility of the stock market. It is hardly affected by price fluctuations or the laws of supply and demand. As an investor, if you would like to diversify your portfolio, investing in gold can help.
Palladium is another precious metal of great value. It is mostly used as catalytic converters for vehicles. This helps to convert toxic gases like Carbon monoxide into a water vapor or CO2. Palladium is the rarest of all metals and this makes the demand very high. Only high-end investors can afford to invest in this metal.
Platinum is an industrial metal. It serves as catalytic converters to reduce dangerous emissions. A large demand for this metal is to use as pieces of jewelry. Platinum mines can only be found in Russia and South Africa. This creates problems that lead to price fluctuations at odd times. This is why Platinum is the most volatile of all the precious metals.
How to Buy Precious Metals
The following are ways to buy precious metals:
Bullions are the physical asset of precious metals. They come in bars and coins. To own this illiquid asset, it is important to have a safe deposit. This will make it easy for you to hold onto it.
Certificate of ownership gives investors the benefits of owning physical gold or silver without storage or transportation problems.
Exchange Trade Funds (ETFs)
ETFs are available for all precious metals. They are a liquid and convenient means of buying and selling silver, gold, or platinum. When you invest in ETFs, you do not have direct access to the physical asset. But you gain the benefits of owning one.
ETFs are not affected by any slight fluctuations in physical asset price. It rather depends on the mining company you purchased from. This is why it is important to buy from a reputable dealer.
The futures market offers leverage to those who make bets on assets. Future investors bet on whether a market will gain or lose and are rewarded if their prediction comes true. It comes with short-term risk as it is uncertain to properly predict the outcome of the stock market. But in the long run, one can gain from futures.
Factors to Consider Before Purchasing Precious Metals
Here are some factors that you should keep in mind:
The Metal Type
It is not wise to buy just any precious metal available. You need to understand the market trend and price volatility of this investment. With this knowledge, it becomes easy for you to choose a metal that suits your investment goal.
Consider the Investment Form
There are different ways to invest in precious metals. You can choose to buy the physical asset as bullions or you can get them as ETFs. If you decide to invest in billions, you need to have a storage room. Failure to have one can pose the risk of theft to the asset.
You may choose to buy ETFs or trade directly in the stock market. Whatever choice you make, you need to realize that each investment comes with its pros and cons. So, make sure you carry out the necessary research on each investment form before making a choice.
Timing is important in the stock market. Sometimes, an investment can come at low prices but sell high. Other times, the market can be difficult and frustrating. Make sure you study the market so that you can keep track of the price fluctuations and trends. To help you understand how to study the market, you can read this article.
This investment is full of fraudsters and scams so you have to exercise caution. Before you invest in this, make sure to have the necessary skills and knowledge. Learn about how to check the purity and quality of the metals.
Choose Only Reputable Dealers
One place you can get this investment is from online traders. Online traders offer a diversified portfolio. Make sure the one you choose offers a buying and storage program. This will help you avoid having physical possession of the asset.
Investing in precious metals helps to diversify your portfolio. However, before you invest in it, ensure to research each type of metal. Doing this will not just help with making a profit, but you will also be securing your funds.