Monday, May 11, 2015

Benefits in Investing in Precious Metals


Investing is a complicated subject that many simply do not understand. There are many different asset classes that anyone can invest in, ranging from stock and bonds to real estate. One of the best investment classes for many people is precious metals. Many people ask the question why consider investing on precious metals and the answer may surprise you. Gold and silver have long been considered to be investments, and at one time were the currency for the world's economies. Over time, nations switched to currencies not backed by gold and silver. This Quick Guide To Investing In Precious Metals can serve as a starting point for anyone who is just starting their investing journey.

Inflation Hedge

One of the most difficult parts of investing in accounting for inflation. Inflation is generally defined as rising prices over time. Inflation eats away at investment returns because as the prices of everything go up, the value of the investments held go down. In a good economy, there is generally strong growth, higher inflation, and good investment returns. However, when economies around the world turn south like happened in the latest recession, people flock to inflation hedges and safe investments like precious metals. There are many different reasons for this, but for the most part people generally have a peace of mind about investing in something that has value no matter how the economy is doing. In a sense, they simply want to know that no matter what happens, the precious metals they own can help them get out of a bad situation.

How To Invest In Precious Metals

There are several different ways to invest in precious metals like gold or silver. First of all, a person can always buy physical gold and silver from a broker. There is generally some sort of commission on the purchase. As the price of these precious metals goes up or down, so does the value of the weight of what a person holds. For instance, if a person buys ten ounces of gold at $500 an ounce and then sells when gold hits $1,000 an ounce they will make a great profit. The key is to invest when gold and silver are at their lows. Precious metals are generally lower when things in the economy are going really well. The herd attempts to go in to riskier investments like stocks or real estate when things are going well and precious metals take a hit.

Quick Guide To Investing In Precious Metals

For general tips, there are several things to consider on precious metals investing. First of all, why consider investing on precious metals is a question asked by many people. As explained in this article, it is a great hedge against inflation and offers intrinsic value in time of disaster. In addition to buying physical weight of precious metals, there are also funds that a person can buy that trade with the price of gold, silver, or other precious metals. It is important to invest in funds that are low commission, so that any gains realized are then put in to the pocket of investors instead of the brokers that sell and buy the precious metals. Earning money on transactions is called churn in the industry, and wise investors in precious metals should do all they can to limit churn in their portfolios because it eats away at returns over time.

Final Thoughts

At the end of the day, for many people adding precious metals to their portfolio makes sense on a lot of different levels. For one, precious metals are a great hedge against inflation and offer a shelter in times of economic downturn. The best times to invest in precious metals in order to earn a high rate of return is when things are going well because people tend to move in to riskier investments.

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