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HomeInvestmentsDiversifying Your Investment Portfolio with Precious Metals

Diversifying Your Investment Portfolio with Precious Metals

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Precious metals are metallic elements which occur naturally; they are rare and have intrinsic value and the chemical substance of these metals is not as reactive as a number of other elements. They are usually malleable and highly lustrous.

Some of the most commonly known precious metals are gold, silver, palladium and platinum. These ingots have played significant roles in human history over the years. They have unique composition that contributes to their value and demand. They are also useful for a number of purposes which include jewellery making, manufacturing, medical treatment, cosmetic surgery and as currency and means of investment.  You can check out this site for more information:https://en.wikipedia.org/

Features and Uses of Precious Metals

The major feature of these ingots is rarity; this means that they not easily available and are in limited quantities.  Some of the other features include the following:-

  1. Malleability
  2. Highly conductive
  3. Extremely durable
  4. Ductile
  5. Lustrous
  6. Anti-corrosive

Due to the above features, they come in handy for making jewelleries, production of electronics and other industrial uses. The list of the uses is quite long but that is not our focus in this article. In this article, we want to focus on how to diversify your investment portfolio with precious metals.

How to Invest In Precious Metals

How to invest in precious metals investment portfolio

Financial experts advise that you do not put all your investment funds in one asset. That is why at least 5% of your total investment fund should be spent on precious metals; you can go as high as 20%. This helps to diversify your portfolio and build a hedge against inflation.

You can invest in these commodities by different means which include buying the physical commodity (bullions and coins), commodities ETFs and gold IRAs; let’s examine them.

Buying Physical Precious Metal

You can invest in any of these ingots by buying the physical commodity.  You can either buy gold, silver, platinum or palladium and there are many ways of buying them as explained below:-

1. Banks or Broke age Firms – These institutions can help you buy any of these commodities at the spot price and have it delivered to you at home. You can also arrange with them to store it for you. It is actually recommended that you store the physical commodity with a broker so that the security there of is guaranteed.

2. Auctions – There are reputable auction houses that make these products available to the public. The keyword here is reputable because if you buy from just anyone, you may end up with fake products.

3. Online Dealers – Although this is a somewhat risky way of accessing the physical commodity, there are quite a number of reputable dealers online. These dealers have built a solid reputation over time and can be trusted. Some of these dealers include Indigo Precious Metals, JM Bullion, APMEX and Provident Metals. However, we advise that you still carry out a thorough research before you engage with any of these dealers.

4. Local Coin Shops – There are dealers who operate only offline. These shops sell coins and bullions and some of them will even buy back these precious metals from you. With a little research on this also, you can always find a reputable store that you can buy from.

No matter the means you choose, bear in mind that we have emphasised transacting with a reputable dealer. Therefore, you must research properly and have a basic understanding of what to look out for and what to expect. You must also know the spot price of the commodities so that you will not be cheated by any dealer.

Local coin shops investment portfolio

Commodity ETFs

This is a very convenient way of buying and selling any of the precious metals we have mentioned in this article.  However, when you invest in this type of ETF, you do not get the physical gold or any of the other metal and you cannot lay claim to the physical commodity in the fund.

What happens with this type of investment is that the investor can participate in the market by trading the unit shares that are listed on the stock market. This is actually considered a cheaper means of investing in precious metals without all the hassles of storage and insurance that come with having the physical commodity.

Precious Metals Stocks and Mutual Funds

These are mutual funds that are focused on the stocks of companies that mine silver, gold, palladium and platinum.  These funds are usually global but with stocks that are domiciled in America and other countries overseas.

This is also another safe way of investing in precious metals because all you need to do is commit your funds to a fund’s manager or Access Management Company.  It is this company or broker that will carry out the investment in bonds and stocks and take care of everything in between.

Precious metals stocks and mutual funds investment portfolio

Futures and Options

This operates just like the conventional ones. It offers the investor the leverage and liquidity to place huge wagers on the commodity of their choice. There is great potential for massive profits as well as losses with whatever commodity that the investor is dealing on.

If you understand the conventional futures and options, then you’ll understand its precious metal alternative. This is one aspect of investing in precious metals that’s not recommended for beginners. This is because it requires in depth knowledge of the desired commodity market for one to play in this league.

Conclusion

Gold, silver, platinum and palladium are the most common and popularly accepted precious metals in society today. They are metals that have great intrinsic value and used to store wealth either as savings or for generations to come. These commodities also serve as great investment tools which serve as hedge against inflation amongst many other advantages.

In this article, we have discussed some ways that you can invest in these metals and use them to diversify your investment. However, we will always stress the need for thorough research and due diligence before committing your money to any venture.

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