Why Should I Invest in Gold and Silver?
Silver and gold are both most popular options for investors looking for a way to diversify portfolios and to protect against inflation. However, they come with different advantages as well as risks, which is why it's important to understand them before investing.
If you're thinking of the addition of precious metals to your portfolio, consult an advisor in the field of finance. SmartAsset's free tool matches you with vetted financial advisors in your area.
1. They're a kind of insurance
While gold and silver can be viewed as investments but they can also be an insurance policy against financial catastrophe. By having precious metals stored at home or in an in an offsite storage facility, you'll have a physical asset that can be sold in order to fund the costs during moments of economic instability or when inflation continues to rise. This is particularly important when you have other investments such as stocks or equity that could be devalued during a recession or prolonged period of inflation.
Many investors feel they can use silver or gold as protection against recession or periods of rising inflation, however how does one compare with the other? It is generally thought of as the higher-profile precious metal that consistently generates the most interest from media as well as market players, however each has its own distinct benefits.
As an example, prices have been exorbitant on certain items due to high demand, but this doesn't mean that all prices are in the sky. In fact, it's worth shopping around because you may be able to find lower premiums on other products such as nationally/government-minted coins from other countries or privately minted bars. Also, it's important to remember that premiums aren't necessarily an expense that they can be repaid back when you sell your metals.
2. They are a form of the preservation of wealth
Investing in precious metals like silver and gold is one of the best ways to preserve your wealth. Many investors keep precious metals in their portfolios as a hedge against the risk of geopolitical instability and economic uncertainty. They are also low relation to other asset classes, which makes them a good method to diversify your portfolio.
The metals of silver and gold have remained highly sought-after throughout history. They're used in the production of jewellery, artwork, and many other products. They are also an effective hedge against inflation, as they are likely to rise in value when paper currencies depreciate.
Furthermore, silver and gold possess a distinct scarcity value. This means that they are better value when the times are tough, in times when people seek an escape from the economic chaos as well as currency debasement.
Precious metals can be a great option to safeguard your portfolio against economic turmoil and geopolitical risks, but it is recommended to consult an advisor before including them in your investment strategy. An Morgan Stanley Financial Advisor can help you understand how including these investment options in your portfolio can benefit you.
The purchase of silver and gold through exchange-traded funds (ETFs) and mutual funds allows you to diversify your portfolio, without having to fret about the cost of storage or insurance. However, these funds come with several disadvantages, among them being that you do not be backed by a physical investment to back the investment. Additionally, these kinds of investments generally have a higher expense ratio than individual precious metals.
3. They're a type of investment
Silver and gold have traditionally served as a safe-haven investment option during periods of uncertainty in the economy. They may also provide protection against rising inflation and stock market volatility.
There are few things to think about before you make an investment in silver and gold. The first is that it's very expensive to hold physical metals. An average Good Delivery gold bar weighs 400 ounces and is worth more than $680,000. Therefore, you'll have to be willing to leave thousands of dollars lying around your house or invest in professional storage. Furthermore the precious metals do not generate any dividends or cash flow therefore you'll have to find a second source of income.
On the other hand it is possible to invest in gold or silver using the use of financial instruments (such as a fund) will change certain of these issues. You'll still need to consider the costs of storage and insurance however, you don't need to worry about handling physical assets.
If you're thinking about including silver and gold in your portfolio, a financial advisor will help you decide if it's a good fit to your requirements. SmartAsset's tool for free matches your with financial advisors who have been vetted in your area. You can interview your advisor to determine which one is a great match for your needs. Start the process today. Find a financial advisor through our tools online, such as the Retirement Advisor Locator, and the Personal Finance Coach.
4. They're a type of currency
Over the centuries, gold and silver have been seen as precious stores of wealth. They have been sought out as safe-haven assets during times of economic and political instability and are still popular for that reason today.
They are also impervious to the elements, making their durability and ease of move around. Although the majority of investment assets are represented by digital 1's and 0's or symbols on paper the precious metals are real items that possess real, tangible worth. They are a better option for a more secure form of currency in comparison to fiat currencies created by all governments in the world.
Contrary to many other commodities they are mostly evaluated based on their value (i.e., how much coffee people are drinking or the extent to which oil could be used for the production of fuel) however, precious metals don't hold this intrinsic worth. This is why the prices of precious metals are typically more unpredictable.
A way to measure this volatility is by looking at the ratio of gold to silver, which reflects how much silver is needed to buy an ounce of gold. As of this posting, the ratio is about 50:1.
While this volatility may be unsettling for some investors however, it's vital to understand that precious metals typically exhibit less price movement per day than most other types of assets. Actually, the median daily trading range for silver in the last five years is approximately $12-$29.