Is gold the best precious metal to invest in? Silver? Or maybe there’s no such thing as a good investment in precious metals? Well, that all depends on what your investing goals are. There’s no question that gold captures the imagination, or that silver is a beautiful metal. But how do these stack up when it comes to your portfolio? What should you look for in a precious metal investment?
The best precious metal to invest in will provide a hedge against inflation. That is the most significant benefit of investing in precious metals. In times of financial volatility, the Commodities sector, which involves precious metals, is often a safe haven for investor’s capital.
Let’s look at some of the ways to invest in precious metals, and reasons to hold them in your portfolio.
Considerations in finding the best precious metal to invest in
Gold is almost always the first precious metal investors think about. However, there are other worthy commodities to consider, like silver, platinum, copper, and palladium, to name a few. Each precious metal has its inherent pros and cons.
There is a lot of volatility and no cash flow with precious metals, although they also have no credit risk and hold their strength in the face of inflation or currency devaluation.
It is also important to consider the geographical locations where mines exist. Areas of political unrest can lead to difficulties in mining and acquiring the precious metals needed to grow and profit.
Investment types to consider: Mining companies and ETFs
Investing in mining companies is one way to have ownership in precious metals, but it also provides an opportunity that investing directly in commodities does not. For instance, investing directly in precious metals does not lead to cash flow for the investor. However, investing in a mining company can involve cash flow. Moreso, investing in the best mining companies can lead to dividends as well. That is not something that can be achieved by investing in precious metals directly.
ETFs also provide an opportunity to include in your portfolio some of the best precious metal to invest in. There are ETFs that hold shares of gold and silver, as well as ETFs that hold a basket of mining companies. Both methods provide access to these precious metals. ETFs are historically liquid investments, so buying and selling them is often easier and less expensive than buying and selling individual precious metal stock.
Investing in gold and silver
Some investors turn to investing in physical gold and silver through bullion or coins. This seems like a simplistic approach, as opposed to dealing with stocks, brokers, or futures. However, there is still a need to house the gold somewhere safe and secure. You can, perhaps, keep small amounts of physical gold or silver at home. Still, for larger investments, it would be a smart idea to store these precious metals in an offsite location with proper security. Going this route will have added fees for storage.
Despite some of these drawback, the best precious metal to invest in can provide you with a hedge against inflation, making them a useful tool for diversifying your portfolio. However, because of their high volatility, it is crucial to invest in these commodities in a way that works best for your investing temperament. Conservative-leaning investors should be careful with the amount of money they invest in precious metals. It would be a safe move to invest no more than 5% of one’s diversified portfolio into precious metals.
What do you find are the best precious metal to invest in? How do you prefer to invest in it?