Precious Metals Investing Can Diversify Your Portfolio

Precious Metals Investing Can Diversify Your Portfolio 5.00/5 (100.00%) 5 votes

We live in increasingly uncertain times when it comes to investing. You don’t have to look very hard to figure that out. Simply pick up a news magazine or pay attention to a commercial break while you’re watching television.

We’re all being peppered with ads and stories of the risk and instability associated with our investments. That means that it’s more important than ever to properly diversify, and that goes beyond investing in a variety of stocks and bonds.

Precious metals investing is a smart way to further diversify your portfolio and limit your risk of suffering a financial catastrophe if the markets take a nosedive.

Best Precious Metals to Invest In

When it comes to precious metals investing, you have four key options to consider: gold, silver, platinum and palladium. First, let’s understand how each is used and where they draw their value.

Gold is the most widely known metal that is commonly invested in, and usually more expensive than the other main options. Its most obvious use is in jewelry, but it’s also used as a conductive material in electronics. It resists corrosion better than other metals, which is one reason it’s so popular. At the time of this writing, spot gold is trading at $1,581 an ounce.

Silver is also used in jewelry, electronics and batteries for small items such as hearing aids and watches. The current price for spot silver is $28.70 an ounce.

Platinum is most widely used in emissions control for automobiles and jewelry, but also has uses in electrical contacts and electrodes due to its conductivity. Platinum is trading at $1,611 per ounce.

Palladium is similar in many ways to platinum, but is less dense and melts at a lower temperature. Increasingly, palladium is being substituted for platinum in catalytic converters for vehicles. Like the other precious metals we’ve discussed, palladium is used in electronics as a contact and electrical connector. Given its limited supply and increasing demand, many believe palladium is poised to quickly increase in price. It’s currently trading at $738 per ounce.

Ways to Invest in Precious Metals

There are several ways to go about precious metals investing, and one of the most basic ways is by acquiring coins. Most government-issued coins are made up of precious metals, which means they sometimes are worth more than the currency they represent.

There’s also the option of purchasing bullion, which is a fancier way of saying bars of gold, silver, platinum or palladium. The main thing bullion has going for it is that you’ll be literally holding onto the precious metals yourself, whether you keep them in a safe or bury them in your backyard!

Of course, this isn’t necessarily secure or feasible for a lot of investors. Bullion can also be extremely expensive, due to the size of the bars. There’s a great alternative for those who want to begin precious metals investing but don’t have enough money to buy bullion.

There are now a number of ETFs (exchange-traded funds) that seek to mirror the movement of the price of commodities, such as precious metals. You can trade ETFs much like stocks, but be sure to do your research. Some ETFs actually hold a certain amount of the commodity that you are investing in, making for better price security. Others only seek to mirror the pricing.