Risk Management Strategy For Those Investing In Precious Metals

Risk Management Strategy For Those Investing In Precious Metals 5.00/5 (100.00%) 1 vote

Like everything else in life, things are good until they’re bad.

Keeping them good when possible is advisable. More advisable, though, is protecting yourself against the perils the times when they inevitably don’t go well.

Such should be the approach when investing in precious metals.

With that in mind, some thoughts to help guide you through your investment:

Remember, It’s A Risk
Whenever you put a dime into a stock, commodity or money market, remember that you may not get it back. Such is the life of an investor, be it a career trader or a saver-upper for retirement. This is why it is absolutely crucial to know the risks before diving in.

All that said, if you do it right, investing in precious metals can prove profitable.

Why, Again, Am Investing In Precious Metals?
Good point. After all, if you’re going to put even a penny of your hard-earned money at stake in any investment option, there ought to be a good supporting argument for doing so.

Precious metals are an attractive way to safely and reliably diversify and stabilize your portfolio. Of course, commodities markets will vary, sometimes violently in the short-term. However, they tend to have much stronger long-term growth, which for anyone looking for something to stabilize their portfolio, is what you’re going after in the first place.

Before posing and answering another question, let’s outlay your options.

There are about 15 different precious metals you can explore investing in. However, the most popular are gold, silver, platinum and palladium.

When choosing a precious metal to invest in, it’s important to brush up on the industries that use them the most. Very much like investing in common stock, understanding the long-term health and trends of industries that use commodities are as if not more important than those of the commodities themselves.

Moving right along to the crux of our discussion: how do you protect yourself?
Risk Management Strategies
One, check in with an investment broker. It may cost you a few dollars, but better a few (in whatever hourly rates he/she charges for his/her time) than a bunch (for incurred losses because you didn’t do enough homework). Ask questions. Lots, and lots of questions. Many of us are either confident in our ability to invest in precious metals or would feel as if their successes would be diminished if they were to ask for help.

The merits of those aside, it’s still prudent for you to check in with a pro.

There are other risk-management investment strategies available, but for the intents and purposes of this writing, let’s give you more reason to pay someone a visit.

Know Your Investment Types, Know Your Risk
They’re often one in the same.

As is the case often in the investment world, where you invest in precious metals may dictate the risk of your investment more than that of the precious metal itself.

As a general rule, bullion coins and bars, mutual funds and covered-call options should be considered the least risky forms of investing in precious metals, simply because they’re notably the most long-term. As we move further into shorter-term-type investments, the risk will obviously grow. (Then again, so too do potential payoffs.)

Next are exchange-traded funds and major mining companies (the bigger the size tends to mean the more likelihood of sustainability, which, for you, means a safer bet), followed by midsize mining companies (see?) and numismatic and collectibles.

Highest risks include minor mining companies (who knows how long they’ll be around?), buying call or put options (it’s always a gamble), with futures precious metals contracts in general ranking atop the list of risks (because they’re the hardest bets to win).

Now that you know the risks, you should be better equipped to invest in precious metals.