Many investors understand the importance of diversifying their portfolios; it is unwise to put all your eggs in one basket. For this reason, many investors turn to gold and silver. Investing in gold and silver can be incredibly lucrative, but it’s essential to do your due diligence as with any investment. To get started with these precious metals, having an understanding of why they’re valuable is necessary.
What Makes Gold Valuable?
Gold has several unique properties that make it valuable. It is prized for its durability and malleability, as well as its ability to conduct both electricity and heat. While it does have applications in some industries such as electronics and dentistry, it is primarily used in currency and jewelry.
Gold has long been a symbol of wealth. Its value has held up through times of economic crisis even when paper currencies have not as fared well. Gold is often considered a safe bet when investors perceive instability in banks and paper currency or when there is political unrest.
The Difference between Gold & Silver
While gold’s actual usage is primarily as a store of value or luxury items, silver has many industrial uses. As a result, the silver market tends to be more volatile than gold. In part, silver trades much like gold as a hoarded commodity to preserve wealth; however, due to its industrial uses, supply and demand principles also hold sway in determining its price.
How to Invest in Gold & Silver
There are a few options available to those who would like to invest in gold and silver. These options include the following:
Buying Bullion – While owning bullion gives you direct access to the physical commodity, coins and bars can be cumbersome to store, and it is more difficult to trade. There’s also the issue of having a safe and secure place to store bullion.
Commodity Exchange Traded Funds (ETFs) – ETFs are a convenient means of buying and selling gold and silver; however, this form of investment doesn’t give you direct access to the physical commodity.
Common Stocks and Mutual Funds – Just as you would invest in other stocks and funds, you can purchase shares of companies in the mining industry. It’s important to consider that the value of the stock hinges not only on the price of the metal but also on the success or failure of the company itself.
Futures and Options – Futures and options allow for liquidity and are ideal for those who can make significant investments. While the profits can be immense, so can the losses.
As always, it is wise to thoroughly investigate your options before deciding whether to invest in precious metals such as gold and silver. As with any investment, there are risks and advantages involved, and ensuring that you are aware of precisely what you are investing in is essential.