Should You Invest in Precious Metals?

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If you have all of your investments in stocks, bonds, and mutual funds, your portfolio may not be properly diversified. While it can be helpful to have holdings across a range of industries, it’s also a good idea to invest in commodities that hold their value well over time. Precious metals are just what your portfolio needs. 

Precious metals hold their value well over time, so adding them to your portfolio acts as a hedge against the power of inflation to shrink your wealth as the years pass. They can also be a good way to protect your portfolio from market volatility. And, of course, many people invest in precious metals as a way to safeguard their wealth in times of crisis. Let’s take a look at why you should consider investing in precious metals.

Precious Metals Serve as a Hedge Against Inflation

Over the years, inflation decreases your money’s purchasing power. A dollar today will be worth significantly less in 10, 20, or 30 years if you just stick it under your mattress — that’s why you should invest in stocks and bonds rather than sticking all your money in a savings account. Good investments will offer returns that outpace inflation, so your money doesn’t lose value over time.

Investing some of your money in precious metals is a good way to protect your wealth from inflation, because precious metals don’t lose value the way that money does over time. When the value of the fiat currency decreases, you simply need more of it to purchase the same amount of gold, silver, platinum, or so forth. You can preserve the purchasing power of your wealth, and since precious metals historically see huge gains in value over the long term, an investment in silver, platinum, gold, or palladium when you’re young could pay large returns when you’re ready for retirement.

You Can Protect Your Wealth from Market Volatility 

Like other commodities, precious metals have intrinsic value. But the value of metals like platinum, palladium, silver, and gold isn’t tied to the stock market. Even when the market crashes and traditional investments are losing money, your money should be safe in precious metals — especially gold, the most popular vehicle for precious metal investors. When economic times are uncertain, investors tend to flock to precious metals, driving the spot prices up. Having some precious metals in your portfolio can counteract losses you might incur when stock prices dive.

You Have Options When It Comes to Investing in Precious Metals

Perhaps the most straightforward way to invest in precious metals is to buy coins and bullion bars. As an average investor, you may not be able to afford gold coins, or even coins made of platinum or palladium. But you can buy a 5 oz silver bar for a fraction of the cost of a 1 oz or even a 1/10 oz gold coin. Its low price makes silver the most accessible of the precious metals, so it’s often the first precious metal most investors choose when branching out into commodities. 

Investment coins and bullion bars have to be stored and kept safe, so they’re really only a good choice if you have access to a safe or safe deposit box, or if you can afford to have them securely stored at a depository. Having them stored in a depository is the best option, because it results in an intact chain of custody that makes selling your metal easier. If you hope to be able to liquidate your precious metal holdings easily, buying in smaller increments will help. Choose coins like the Canadian Maple Leaf or the American Eagle, as these are easiest to sell.

If you want maximum liquidity without the need to store or sell physical precious metals, consider investing in precious metal stocks, bonds, or funds. You can buy stocks in mining companies, refineries, and streaming companies, and you’ll see consistent returns as long as the companies are doing well. You can protect yourself from risk by choosing mutual funds that buy and sell precious metal stocks, futures, or the metals themselves. Exchange traded funds (ETFs) are also a good way to expose yourself to precious metals without the illiquidity of an investment in physical metals. These kinds of investments add precious metals to your portfolio, and can offer you the protection you need against inflation and market volatility, but they’re also easy to sell and they pay returns consistently, so you don’t have to wait until you sell your precious metals to get your money back. 

Investing in precious metals is a good idea if you want to hedge your portfolio against inflation and market volatility. Add something shiny to your portfolio — you’ll get more stability and better returns down the line.

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