Once thought to be a diversification vehicle for an investor’s portfolio, and a little-known vehicle at that for the average investor, the precious metals market has, itself, diversified such that there are several precious metals investment vehicles even a small investor can engage to fully diversify a portfolio.
Even though it is heavily advertised, mostly in the arena of purchasing physical precious metals – gold, silver, platinum and palladium – there still seems to be hesitation by small and large investors to engage these commodities as if it were a realm undeserving to enter unless the investor is a big player in the market.
But the fact is, the metals market is for any investor, small or large, to engage without fear of risk that the investment could be gone tomorrow. The volatility of some precious metals is not as significant as it may appear. On the other hand, traditional investments in paper currency-based stock market schemes are just as volatile; in some cases, even more than the precious metals market.
There Are Several Precious Metals Market Options
The most obvious metals market is ownership of physical precious metals via bullion coins and bars. As a hedge against inflation and devaluation of currency, there is no better investment because physical gold, etc., has the advantage of not only its intrinsic value due to its relative rarity as mined from the ground and refined, but it also has added value by virtue of its production into bullion. Investment in physical metals requires an impregnable safe for secure storage of the bullion to protect the investment against theft.
Physical precious metals investment has the added benefit that it is easily converted to enhance purchasing power when other forms of currency lose their value by devaluating inflation. Because precious metals retain intrinsic value and market value, it will assure exceeding the erosion of value and increasing costs of purchased products.
Another metals market is the purchase of certificates that represent physical ownership. It has the benefit of physical ownership but with much reduced risk of loss. However, certificates are not as easily converted to enhance purchasing power if that need arises, so it is a suggested addition to physical ownership rather than a separate option.
Exchange traded funds (ETFs) are another precious metals market option. There are ETFs in other commodities and these for precious metals function exactly the same way to provide a liquid trading vehicle in real time.
Another precious metals market is direct investment in mines and refineries of precious metals. However, there are some risks to this type of investment. The investor must research potential mines for their longevity and stability before investing in them. Some mines are plagued by labor issues that detract from full production, or social volatility in-country that has the same labor disruption potential, and some mines are under strict government rule and regulation that can also impede production.
Finally, just as in other investment schemes, the metals market can offer stocks, futures and mutual funds which either deal exclusively with precious metals, such as companies using precious metals in their manufactured goods, or includes them in other bundled investments. These markets are more volatile than the others, carry greater risk, but, as a result, also offer greater and sooner return on the investment. These are not the best vehicles for the novice investor, but if there is additional disposable income with acceptance of the risk, this type of precious metals market can produce big yield.
The historic growth pattern that the precious metals market represents makes it a safe, secure and profitable investment into which any investor should invest.