Many people who consider themselves savvy investors have little or no direct experience with alternative investments, such as precious metals. The reasons for that are diverse and plentiful, but some of the more common are: risk aversion due to the complexity of the subject; price fluctuation; and a limited knowledge of the role that precious metals can play in a balanced portfolio.
Precious metals, which include gold, silver, platinum and palladium, are primarily used as an investment to offset risk and serve as a hedge against inflation. One typically owns other investment assets in a complete portfolio. Precious metals are seen as an insurance policy for your overall assets, because the price of both primary precious metals – gold and silver –typically moves inversely to the economy. If the stock market is up, gold and silver are usually down a notch. But when the stock market crashes, precious metals take on a whole new luster, as we plainly saw during the Great Recession.
[Editor’s Note: Interested in additional perspectives on gold? See “Gold Investments Remain a Stable Choice Despite Economic Uncertainty.”]
Since this article’s original June 9, 2015 publication, all four precious metals have seen either stable prices or gains: gold is trading at $1,283,80, up 9%; silver and platinum have retained their values, and currently trade at $15.1 and $844, respectively; and most impressive of all, palladium has doubled, rising 107% to $1,546.
With that in mind, here are the 5 “do’s” and 4 “don’ts” to know if you are considering investments in precious metals:
[Editor’s Note: Our webinar “Alternative Assets Part 2: Investing in Real Estate and Other ‘Hard’ Assets” provides further insights on diverse portfolios.]
The 4 Don’ts of Precious Metals Investing
The world of precious metals investing can be a complex but very rewarding option for savvy investors. Like anything else in the world of investments, do your due diligence and apply common sense, and you’ll be on your way to a truly balanced portfolio.
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