Investors looking to hedge their wealth against devaluation from economic forces would do well to consider the precious metals available to them. There are four primary metals traded on the world’s markets – palladium, platinum, gold and silver. Of the four, the easiest and most commonly used options are gold and silver. If you are new to the world of precious metals investing, there are several things you need to know before you start buying gold and silver, or even palladium or platinum.
When you begin buying gold and silver, most experts recommend starting small. You should only add between 5 – 10% of your portfolio in precious metals. This allows you to test the waters so to speak. Precious metals investing is a proven way to safeguard your wealth, but it’s not for every investor. It’s a long-term strategy that offers slow growth with a focus on protection. It’s not the stock market with its overnight wealth generation. If you want to get rich quick, precious metals is not the option for you. However, if you want to add protection and diversification to your portfolio, then buying gold and silver can be a very good option.
Know Your Options
When you think of buying gold and silver, chances are good that you imagine a large bank vault stocked with massive bars of metal. That’s the way the precious metals industry has been depicted in movies and fiction, but it’s just that – fiction. Buying gold and silver doesn’t mean you need to purchase a huge bar of metal. There are quite a few options out there.
Gold and silver can both be purchased in several forms, including the following:
Bullion – Bullion is a blanket term used to describe bars of varying sizes, as well as rounds (they look like coins, but because they’re not minted by a nation’s mint, they’re rounds instead). Coins range from very small all the way up to a full ounce of metal and more. Bars range from fractions of an ounce to hundreds of ounces (the typical gold bar seen in movies).
Coins – Gold and silver coins are available in both collector and investor formats. For instance, the Morgan silver dollar is a silver collector’s coin, valued for both its rarity and its silver content. The American Eagle silver coin, on the other hand, is valued primarily for its silver content, rather than any rarity.
If you’re considering buying gold and silver coins, think long and hard about what options you wish to purchase. It might seem appealing to buy collectors’ coins because of their dual value. However, this often isn’t the right move for beginning precious metals investors. It can be very difficult to determine the collectible value of a gold or silver coin, which makes it hard to calculate your return on the investment. For those just starting out, it might be wiser to stick with bullion coins or newer coins that have little or no real collectible value.
Understand How Gold and Silver Work
Gold, and to a lesser extent silver, move conversely to the market. That is, when buying gold and silver, you’re adding protection against economic downturns. When the economy drops, gold and silver rise in price. When the economy improves, though, those metals generally drop in price. This is not due to any change the metal’s actual value, but in the worth of the currency needed to purchase the metal. It’s a hedge, ensuring that your wealth doesn’t take a hit.
Buying gold and silver is a very wise idea, and can help protect your wealth for the long term.