How to Invest in Precious Metals?
How to invest in precious metals? Let's consider the main methods.
You can buy bullion of precious metals. Advantages – bullion are tangible, they can be purchased through a
bank and sold
there. Disadvantages - are the most costly method (losses due to spread - are the difference between the buy
and sell
prices), keeping bullion at home is risky, and in a bank it is expensive; if damaged, the price of the
bullion will
decrease.
Buying investment coins. Mostly coins made of precious metals are more expensive than the metal in them,
especially if
the coin is issued in a limited edition for some event. The pros and cons are almost the same as bullion,
but the spread
is slightly smaller. Platinum and palladium coins can also be bought, but they can be difficult to
sell.
Another method - commodity exchange traded funds (ETFs) - exist for three precious metals: gold, silver and
platinum.
Advantages: they are a convenient and liquid means of buying and selling precious metals without having to
buy the metal
itself, convenient prices for diversification. Disadvantages: no dividends (except for ETFs of mining
companies). There
is a more risky way to go with ETFs which is to buy futures and options.
Buying stocks of the mining companies is another way to invest. Advantages - dividends (a way to generate
regular
income), diversified business (many companies mine several metals at once and suffer less from price
volatility).
Disadvantages: there is a lag in the profitability of stocks of mining companies from the profitability of
precious
metals; the optimal deposit can be quite high.
The recommended share of precious metals in a portfolio is 5-10%, if you invest too much, you can miss the return on other assets, but even a small share of precious metals in your investment portfolio can reduce volatility and risk and save your money (Forbes experts).