- 30 Dec 2022
- Precious Metals
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Diversification is a complex endeavor. You may reduce the amount of risk you're willing to take to earn the money you want, or you can diversify to increase your chances of doing so. Investment in a wide range of assets, including non-traditional equities and bonds, is the surest way to achieve genuine diversification, regardless of your degree of expertise.
To that end, precious metals are among the best alternative asset classes for those who want to hedge against stock market volatility. Gold and silver are examples of precious metals valued for their rarity, chemical distinctiveness and practical industrial applications. Because of this, they make an excellent investment for the future.
Numerous investors have found that owning precious metals like gold and silver is a reliable way to grow and safeguard their money. That said, precious metals investment still has its share of inherent risks.
If you're considering investing in gold and silver and don't know how to take the plunge, consider reading this article. Here are a few essential points on how much of your portfolio should be in precious metals, the importance of precious metals and some things you should consider about precious metals.
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Why Precious Metals Are Worth Adding to Your Portfolio
Boom and collapse are inevitable results of Keynesian monetary policy, the dominant economic model of policymakers and central bankers since the Great Depression. The economy regularly goes through cycles of growth called "booms" and declines called "recessions".
More than 121 months into its expansion, the U.S. economy has established a new record for the most extended economic "boom" cycle in human history. According to the theories of Keynesian economists, a period of unparalleled economic expansion is inevitably followed by a period of unprecedented economic recession.
We anticipate that the value of stocks and bonds will fall rapidly initially when consumer and investor confidence falls. Rare commodities are a hedge against typical asset volatility because of how well they keep their value through economic downturns and crises. Therefore, precious metals are an excellent way to hedge your financial resources.
This is of paramount importance for business owners. Precious metals are a great way to hedge against the uncertainty of the startup environment. Gold and silver are long-term strategic holdings that may safeguard wealth in the case of a business closure. Investing in precious metals, ETFs can offer much-needed cash flows during times of market downturn and a slowdown in your business cycle.
Gold and silver provide businesses with an effective means to offset the ups and downs of their cash flows and liquidity needs. This is particularly important for small businesses, startups, businesses with restricted cash flows or businesses that are dependent on seasonal or irregular business cycles.
In other words, when businesses invest in precious metals like gold and silver, they ensure they have a way of storing some of their funds outside the banking system should business activity cease. It's a safeguard that may not be available through more traditional investments such as stocks or bonds.
Precious metals are also significant for personal investment. Silver and gold coins can be a great alternative to leaving funds in an estate or financial trust if you're looking to leave tangible assets behind for your loved ones when you pass.
Furthermore, precious metals are an excellent way to diversify a portfolio, especially for those who have already invested in stocks and bonds. Real estate, art and collectibles make for attractive investments, but none are as technically sound as precious metals. The main advantage of gold and silver is that they are not correlated to other asset classes in a portfolio. This makes them a great way to hedge risk against more traditional investments.
How Much of Your Portfolio Should Be in Precious Metals?
Your risk tolerance, investment horizon and personal situation will determine how much of your portfolio you should allocate to precious metals. For example, a younger individual or business with a long investment horizon will be able to take on more risk than an older person with a short investment horizon.
A long investment horizon can also play into the amount of risk an investor is willing to take. The younger, healthier and less financially encumbered, the more comfortable they will be taking risks that come with long-term market exposure.
If you are an experienced investor with a long-term perspective on the markets, you should put at least a small percentage of your portfolio in precious metals. At least ten percent is recommended, but 15 to 20 percent is advisable for those with a longer investment horizon.
Some might invest more than 15 percent of their portfolio in precious metals. As with most investment decisions, it's essential to calculate how much risk you're willing to take.
The risk of missing out on superior returns given by other asset classes increases if you devote too much of your asset allocation to precious metals. While diversifying into other asset classes is essential, not having enough in gold and silver might leave you vulnerable.
How Do You Buy Precious Metals?
If you're starting in the market, you might be wondering where and how to put your money into precious metals. How you purchase anything is determined by the asset you wish to acquire. Learn the differences between buying gold bullion and buying gold through an exchange-traded fund (ETF) before making any investments.
In order to buy gold and silver, investors are likely required to have an account with a brokerage firm or precious metals dealer, which is the best way to purchase these assets in bulk. If you're interested in purchasing silver and gold bullion coins, consider your motivation for buying these assets.
Bullion is the most liquid form of precious physical metals in bullion coins (i.e., legal tender). These coins are usually smaller and, therefore, more affordable than bars. Bullion coins can be exchanged for other precious metals, which makes them ideal for investors who want to liquidate their holdings in the future.
The other benefit of bullion is that it can be bought in small or large dollar amount increments. This can be helpful for those with smaller budgets and who want to save up for larger purchases later. It can also be transferred easily from one person to another, which is advantageous for those who want to gift a portion of their holdings to a friend or family member. Bullion is also less hazardous than bars, as it can be segregated for storage.
Exchange-traded funds (ETFs) that track bullion prices provide investors with a liquid way to gain exposure to the precious metal. Shares in gold ETFs may be purchased and sold on the stock market just like any other investment.
Only a few traders and investors find ETFs for precious metals as enticing as real commodities. When investing in an ETF, you are taking on counterparty risk because the metal itself is stored with a bullion bank, which might default or fail to meet its commitments. If the economy were to collapse or a natural calamity occurred, investors owning gold or silver ETFs would be unable to utilize their bullion or coins as currency.
What's The Difference Between Gold Coins and Bars?
Gold coins and bullion bars are two types of metals used in investments. They are both commonly used in investment circles, and many investors like to trade them to diversify their investment assets.
For investors who wish to purchase gold bullion coins, they should be made from the same mint and have equal weight as that of gold bars. Bullion coins are not U.S. Mint direct obligations, meaning they are bought from other investors. If a coin has a design, it can be easily bought or sold for its gold content.
The price of gold bullion coins is more volatile than that of bars. This is because the current value of bullion coins is based on their gold content and precious metals, which are traded in futures exchanges. Anyone who wishes to buy bullion coins should, therefore, know about this volatility and the investment risks that come with it.
Gold bars have a different utility than gold bullion coins. They are bought and sold without mint marks or sizes and designs. They are also not legal tender like bullion coins.
Gold bars are more liquid than bullion coins and have lower market price volatility. This is because of the abovementioned features. Bullion coins, on the other hand, are liquidated through futures contracts on exchanges that trade gold and silver.
As for market price volatility, investors can purchase gold bullion by purchasing gold futures separately. In order to trade futures, investors are required to set up an account with a market regulator. This can be a costly venture if they wish to buy above $50,000 worth of gold bars.
It is also crucial for investors to know that the current value of gold bars and bullion coins is a function of their price and the prevailing futures prices for gold. Therefore, investors buying gold bullion coins or bars need to understand the factors that affect the value of these precious metals.
Buying Bullion vs. ETFs
Multiple sources provide actual gold bullion for purchase. Silver, gold, palladium and platinum coins and bars can be purchased from various sources, including local and internet marketplaces. Always use caution when purchasing gold or other precious metal bullion, and only buy bars or coins that display the maker's name, weight and purity grade. Genuine gold bullion often has the purity marking 99.99% on the front.
Unlike buying physical gold or other precious metals, buying ETFs is much easier and carries less risk. ETFs can be bought and sold on public markets and afterward traded through intermediaries like brokers and financial advisers. Before investing in gold and precious metals, you should talk to your financial adviser about popular, low-risk gold or precious metals ETFs.
Should You Buy More Gold or More Silver?
There are numerous similarities between gold and silver in their physical forms. They are movable, highly liquid and tradable practically everywhere globally, and you can hold them in your hands. However, each also has its perks.
For starters, silver's price fluctuates more than gold's. Thus, in a bull market for precious metals, you stand to gain more than with gold, but you also stand to lose more. Second, silver is much bulkier than gold. You'll likely need to use a professional storage account for most purchases.
Physical gold is definitely portable as long as you have the money for it. Silver is more complicated. The best way to store silver is in a solid form, such as bullion bars or coins. If you are between jobs, purchasing silver and gold ETFs online is the most portable alternative.
The Recommended Precious Metal Companies
The five precious metals companies that make up our top picks are all long-standing, trustworthy enterprises.
Goldco is a leading precious metals company that provides gold and silver coins, bars and rounds to customers throughout the United States. With over 15 years of experience in the precious metals industry, Goldco has established itself as one of the most reputable dealers in the country.
They offer a wide selection of products, including coins, bars, rounds and more, all of which are sourced from trusted mints and bullion dealers around the world. Goldco also offers storage solutions for investors looking to grow their portfolios with physical gold and silver.
They have a knowledgeable staff of experts available to answer any customers' questions about their precious metal investments. In addition, Goldco offers various services such as asset protection, IRA rollovers, portfolio diversification and estate planning.
With their commitment to customer service and secure storage solutions, Goldco is your go-to precious metals company for anyone looking to invest in gold or silver.
Augusta Precious Metals is one of the leading precious metals companies in the world. Founded in 2012, they specialize in providing their customers with a wide variety of precious metal products, including gold, silver, platinum and palladium bars, coins and rounds. They offer a variety of mintages from many different countries, as well as exclusive products from their private mint.
Augusta Precious Metals also offers a range of products for investors of all levels, from beginner to expert. Their customer service is excellent, and they are known for their fast shipping and secure packaging.
One of the main advantages of buying precious metals from Augusta Precious Metals is their competitive pricing. They often have sales and promotions that allow customers to get the best prices on their orders. Additionally, they offer secure payment methods and easy returns. They also have an investment forum and blog posts that provide customers with helpful information and advice on investing in precious metals.
Augusta Precious Metals is a great option for buying or investing in precious metals. They have a wide selection of products, competitive pricing and excellent customer service. Their secure payment methods and fast shipping make them a great choice for purchasing precious metals safely and quickly.
American Hartford Gold is one of the leading precious metals companies in the United States. They offer a wide range of investment-grade gold and silver products and platinum, palladium and rhodium products.
American Hartford Gold offers a variety of products at competitive prices, including coins, bars, rounds, bullion and jewelry. They are an authorized dealer for many leading mints, including the U.S. Mint, Royal Canadian Mint, Austrian Mint, Perth Mint, Sunshine Mint and others.
In addition to its selection of products, American Hartford Gold also provides educational resources and investing advice. They have an extensive library of articles and videos covering topics such as how to invest in gold and silver, understand the gold market and how store your precious metals. They also offer personalized portfolio advice and financial planning services.
American Hartford Gold is committed to providing exceptional customer service. They offer a satisfaction guarantee and will work with customers to help them find the best solution for their needs. They are also BBB accredited and have earned an A+ rating from the Better Business Bureau.
#4. Birch Gold Group
Birch Gold Group is one of the leading precious metals companies in the United States. They provide high-quality gold, silver and other precious metals at competitive prices. They are committed to helping their customers protect their financial future by diversifying their investments with precious metals.
They provide various products, from coins and bars to IRA-eligible items, and offer helpful advice on selecting the right product for your needs. Their knowledgeable staff provides personalized service and answers any questions you may have.
They have an A+ rating from the Better Business Bureau and are members of the Industry Council for Tangible Assets. Their secure online ordering system makes it easy and safe to purchase your precious metals. With Birch Gold Group, you can rest assured that you're getting the industry's highest quality and most competitive pricing.
#5. Noble Gold
Noble gold is one of the best precious metals companies in the world. They specialize in investing in and selling physical gold, silver and other precious metals. With a focus on personal service, Noble Gold offers expert advice, competitive pricing and secure storage for their clients. They also offer a wide range of products, such as gold coins, bars, rounds and jewelry.
Noble Gold has a reputation for being one of the most professional and reliable precious metals companies in the industry, and they are fully insured to ensure their customers' investments are safe. Additionally, they have an A+ rating from the Better Business Bureau and have been featured in Forbes and other respected publications.
Their customer service team is also highly trained and experienced, making them a great choice for anyone looking to invest in precious metals.
Whether you're looking for growth or preservation, precious metals should be part of your investment portfolio because of their low correlation to the markets and outstanding performance during down periods. Gaining exposure to gold and silver through bullion bars, coins or ETFs protects your wealth against a drop in the dollar's value.
Gold and silver are generally stable assets that offer protection against the volatility of the stock market, which has increased due to the record-breaking period of the global economic boom and the weaknesses that still exist in the worldwide financial system.