Precious metals represent a unique opportunity for savvy investors, because their prices remain relatively stable even in times of economic crisis. When most people think about investing in precious metals, they envision stacks of gold bars sitting in a bank vault. While buying this gold bullion is one investment option, there are other ways to invest in precious metals. Myriad investment strategies exist, but there are five principle investment options.
Tangible coins and bars: These are often considered the safest
form of investment, since the value of precious metals is relatively stable, compared
to other investments like stocks and mutual funds.
- Bullion is pure or almost pure precious metal, usually in the form of bars.
- Minted coins also hold value. Investing in coins requires some research, as quality and rarity significantly impact a coin’s value.
Certificates: A certificate represents ownership of a specified
quantity of a precious metal. They carry about the same risk as coins and bars.
- One benefit of certificates is that they eliminate the necessity to store the metal itself.
- Generally certificates can be purchased in predetermined monetary sums, so they may offer less flexibility.
Precious metals mutual funds: Like a traditional mutual fund,
a precious metals fund purchases quantities of different metals, or invests in several
different precious metals companies.
- Because mutual funds are already diversified, these investments are less vulnerable to fluctuations due to one company’s success or failure.
- Mutual funds, unlike bars or certificates, are often difficult to liquidate, and may be subject to management fees.
Stock in mining companies: This sort of investment carries a
higher risk, because it relies upon the success of a single company. If investing
in the metals themselves is unappealing, it is possible to invest in the companies
that extract and refine the metals.
- Because the demand for precious metals is generally consistent and steady, stocks in mining companies can be safer than stocks in less stable industries.
- Stocks, however, carry a high risk because they rely on only one company. They can also be difficult or costly to manage.
Gold and metal futures: Futures are a contract to buy or sell
a metal at a specified price after a particular time period. Profit depends upon
favorable market changes during the contract period.
- Futures represent higher-risk investments, since they gain value from potential growth. They can also result in higher returns.
- Most investments in gold and metal futures require professional management, which can cut into profits.
Precious metals are an excellent way to diversify an investment portfolio. The options available range in risk and return levels, meaning that anyone can find an appropriate choice to meet investment goals.
This information is provided for general reference purposes and does not constitute professional advice. For detailed coin collecting or investing information, please consult with a professional expert.