When looking at various investment opportunities, alternative asset classes can play a vital role in one’s portfolio. Investments in the precious metals complex in particular may be a very wise choice to include in one’s overall investment strategy. The precious metals complex includes gold, silver, platinum, and palladium. In fact, people have invested in precious metals for thousands of years. Worldwide, gold and silver especially have been used in place of paper or “Fiat” currency. Although paper currencies are now commonly used for the purchase of goods and services, the viability of such a fiat currency system is constantly being questioned.
Why Own Precious Metals?
The reasons for owning and investing in physical precious metals are many. J.P. Morgan once stated, “Gold is money, everything else is credit.” This statement really drives home his point. Physical metals may be transacted anywhere in the world and the value for the metals is going to be the same regardless of where you may be. There is no counter-party risk when transacting in physical metals. Paper currencies however, are really nothing more than an IOU from the issuing institution. Paper currencies are backed up by governments and institutions, not by resources. Paper currency values can change quickly and dramatically. What one dollar buys today may be far less than one what one dollar buys tomorrow. Although their prices change over time, the precious metals are considered a store of value worldwide and are thus not susceptible to such fluctuations. Speaking of currencies, precious metals can be used to try to protect oneself from currency debasement. Simply look at your cost of living expenses-does a loaf of bread cost more than it did a few years ago? The answer is yes.
The fact is that paper money can lose its buying power over time. Precious metals however, hold their value. Imagine the U.S. dollar falling in value very quickly. With the falling value of your dollars everything becomes more expensive as a dollar just does not go as far. Needless to say this is not a good situation. Many people have heard the term “Hyperinflation.” This is a very real and a very scary situation in which a government or institution simply tries to “Print” its way out of a financial mess by adding massive amounts of currency. Again, this can end with disastrous consequences (Just look at what happened in Zimbabwe and its inflation rate). Owning gold or other metals would have been a huge help to people affected by this situation as their values would have held up regardless of how the currency was faring. Precious metals may not only help during times of hyperinflation but can also be of benefit during times of deflation, or rapidly falling prices. This is due to the fact once again that although their prices may fluctuate, the precious metals tend to hold their value, and their value will remain constant across state, country, and continental borders.
Investments may be made in precious metals quickly, safely, and anonymously. It is very easy these days for anyone out there to make an allocation into this asset class. One should also keep in mind that central banks and governments are net buyers of gold. The fact that the largest players in the game are buying gold ought to tell you something!
How To Invest In Precious Metals
Investing in this asset class is not nearly as difficult as many people believe. Looking at just the physical metals and no “Paper metals” one has many choices these days to accomplish their investment objectives. Bullion may be purchased as coins or bars and come in many different sizes and denominations. This allows investors big or small to purchase physical metals in the sizes or increments of their choosing. This is a great aspect of precious metals investing as many will buy incrementally and thus be able to dollar cost average their purchases over time. In addition, one can easily diversify their precious metals holdings between products. As with any product or vehicle, diversification is an integral part of sound investing.
Investments in precious metals may be delivered to your residence, held in bank safe deposit boxes, or kept in secure storage facilities. Some types of investments in precious metals may also be held within a tax deferred IRA or other retirement vehicle. One should consult their tax adviser on such matters.
Precious Metals Dealers
One of the most important parts of investing in precious metals is finding a reputable dealer to do business with. As with any product that is sold, one should investigate who they intend to give their money to. This has become very easy with the Internet. One can quickly and easily scour the net for reviews of different dealers and see what others have experienced in doing business with that dealer. In addition, one should look at time in business, product selection, and pricing. While sometimes cheaper is not better, one should look for a dealer with good reviews and competitive pricing. Finally, a good dealer will help you get the products that best suit your investment objectives. They should be happy and willing to answer your questions, and they should also be willing to educate their customers. A good example of this is Monex. Monex has been in business for a long time, and offers complete investment services in precious metals. Monex’s website contains a wealth of information. It gives live precious metals price information. It also has detailed sections on why and how to invest in precious metals. Finally, it contains numerous resources for getting information on such investments. Monex seems to know that an educated customer is a better customer. This is the type of dealer one should look for when making such investments. Remember, dealers will happily compete for your business so make them work for it. Look for the best overall value when it comes to price, customer service, and product line. Payment options, insurance, and shipping times should be explored as well. As with any type of investment, if one does their homework beforehand, the investment experience will likely be easier, more effective, and more rewarding.