When it comes to investing, there are a lot of trade secrets to get familiar with. It’s hardly surprising, but it does leave a lot of newcomers or beginners rather confused when they get started. That’s why we’re here today: to help clue you in on this “insider knowledge” of sorts. Don’t worry – this isn’t the shady kind.
Rather, we just know how hard it can be to dip your toes into investing and feel it’s worth covering some of the basics for anyone interested in getting started. You can always look to gold IRA companies to provide some more information as well, since they’re the experts in this field. For now, though, let’s focus on these five secrets you should know about investing in gold and precious metals.
One: We Can Use it to Diversify Our Portfolios
No matter what experience level or familiarity we have with investing, there’s a good chance we’ve heard of portfolios before. They’re one of the main motivations that many folks have for getting involved in the precious metals market. After all, living by “don’t put all your eggs in one basket” is wise when it comes to cultivating assets in an investment portfolio.
What does this mean, though? For the most part, “diversity” in our portfolios refers to various types of assets that we could acquire. So, it could be differences between the industries the assets come from, or simply the actual nature of them. For instance, bullion is considered different from a stock, even if said stock is from a company in the precious metals industry.
Two: Gold is an Inflation Hedge
This is a point that gets made all the time in the discussion surrounding gold bullion and investments, so we’ll do our best to keep it brief. For anyone unaware, a “hedge” against inflation is a fancy term to refer to assets that aren’t impacted by inflation in the same way that paper currency is.
Gold is one of those few investments that counts as one, largely because its value doesn’t change much over time. Therefore, it naturally won’t be affected by inflation rates as much as most paper currencies. The United States dollar has lost a lot of spending power over the past few decades, as you can see here: https://media.neliti.com/media/publications/419903-impact-of-us-dollar-exchange-rate-and-in-311fc9e9.pdf.
Really, it’s only natural to want to protect ourselves from that. This is especially true for anyone who is looking to save for retirement (which is probably most of us, realistically speaking). Therefore, it shouldn’t come as a big surprise that many retirement funds include bullion. It’s a way to keep our wealth safe from losing value thanks to inflation.
Three: You Need to Make Sure You Own it, Unencumbered
Now we can turn our attention to some of the more well-kept secrets. There are a lot of brokers across the world that sell gold, silver, and other precious metals in a variety of forms. Choosing one isn’t always easy, and part of the reason for that is some of them have some strings attached.
Namely, they could try to sell your holdings that are unallocated or commingled, neither of which are ideal for us as investors in this circumstance. We should do our best to only purchase bullion that we’re certain we’ll have full ownership of. Ideally, the broker won’t be able to hedge it, lease it out to someone else, or pledge it otherwise.
We can think of it this way: when we invest in gold, it’s to give ourselves a lasting asset for our portfolios that we can fall back on in times of hardship or emergencies. Imagine going to liquidate your bullion only to find that it has been sold or promised to someone else – talk about stressful! To be safe, we’d recommend inquiring about this with your broker.
Four: Decide on Coins, Bullion, or a Mix
Early into your investing journey, you’ll want to decide on the specific types of precious metals to add to your portfolio. Resources like this one can offer some insight into that if you’re curious, as far as what might work best for you. The main options that we’ll be discussing are coins, bullion, or both.
It’s dependent on what level of liquidity you want for your precious metals. Bullion tends to be easier to sell in a pinch, but over time, coins are often worth more if you purchase them directly from a government mint. Both types are valuable in their own ways, though, which is why the decision can be so difficult.
If you aren’t sure which to go with, try talking to your financial advisor or the broker you’re considering buying from. Online, many coin prices are somewhat inflated in comparison to what you’d find in person or from direct retailers. However, that doesn’t mean you can’t find a good deal, so don’t hesitate to explore your options.
Five: Carefully Consider How You Buy Your Gold (or Precious Metals)
For our final secret today, we’d like to point out that everyone should be careful when they choose how they buy their precious metals. Using a credit card to do so, for instance, is probably not the best idea. After all, who wants to end up in debt because of investments that were meant to help us do the opposite?
Generally speaking, it’s a good idea to have some savings built up before you delve into gold investing in the first place. Then, you can use those savings to purchase the gold. It’s what we mean when we say “storing” our money in bullion or coins.
Make sure you keep that in mind as you decide here and when you purchase your precious metals. They’re a valuable asset to add to our portfolios, but not really worth going into debt over. The goal is to protect ourselves from interest rates, not make a purchase that will be subject to them and cost us more in the long term!