4 Basic Tips for Investing in Precious Metals

Medium Buzz6 July 20222 Mins read122 Views

Did you know that gold had a 25% return in 2020?

Although that’s quite remarkable, it doesn’t mean you should throw caution to the wind and put all your money in gold. Investing in precious metals such as gold, silver, or platinum requires careful strategizing to get the best results over the long term.

Here are 4 basic tips to get you started.

Guide To Investment In Precious Metals

1) Make Precious Metal Investing Part of a Diversified Portfolio

“Don’t put all your eggs in one basket” applies equally well to the basket of commodities known as precious metals. In other words, make sure to have a diversified portfolio because that’s one of the best ways to invest.

A diversified portfolio is made up of a variety of different asset classes — stocks, bonds, precious metals, and more. If one asset is doing poorly, the others balance it out so you’re never on the brink of catastrophe.

Most experts say that investing in precious metals should take up no more than 10% of your total portfolio.

2) Consider ETFs and Mutual Funds

When most people think about investing in precious metals, they think of owning physical coins or bullion. Although that may be one of the best ways to invest in precious metals, it’s certainly not the only way to do it.

For example, you can also purchase exchange-traded funds (ETFs) or mutual funds backed by precious metals (gold, silver, platinum, etc.). Keep an eye out for ETFs and mutual funds that are redeemable in gold or silver. In times of economic uncertainty, these can offer a hedge against the risk of inflation.

3) Use Dollar-Cost Averaging When Investing in Gold

Trying to perfectly time the market when investing in gold (or any other commodity) is notoriously difficult. Conditions change so quickly that “perfect” never seems to come. One way to get around that resistance is to use dollar-cost averaging.

Instead of spending say $12,000 on a one-time lump sum payment for gold, dollar-cost averaging would have you split up that $12,000 USD into monthly installments of $1,000 USD. This kind of investment strategy lowers the risk of inaccurately timing the market. It also helps to avoid over-purchasing during moments of greed or panic-selling during moments of fear.

In the long run, dollar-cost averaging often leads to better results than those that come from trying to time the market.

4) Choose Where You Want to Store Your Precious Metals

One of the great benefits of investing in gold, investing in silver, or investing in platinum is that each is a tangible object with intrinsic value. However, one challenge with that is storage. Where are you going to store your precious metals?

Reputable dealers such as Sprott money offer two main options. One is to store precious metals with them in a secure and insured vault complete with an audit certificate. The second is to request a discreet delivery — for that, it’s helpful to have a safe at home.