7 myths about investing in precious metals
Many metals fall into the category of precious metals. Precious metals are of course gold and silver. Platinum is present as well as palladium, rhodium, and a few others which are less familiar to most people. On the other hand, there are base metals such as lead, iron, aluminum, copper, and nickel.
The investment options are many and some are a little more complex and advanced than others. If you are just starting, trading futures can be a little scary at first.
In the ups and downs of the economy of this century, investors often view the precious metals sector as an alternative to traditional Wall Street securities such as stocks and bonds. Unfortunately, the metal market is filled with myths, half-truths, and haphazard urban legends that many people underestimate. Here are some of the most common myths potential investors will face:
Retail investors are unable to enter the metal market.
Unlike some securities markets, gold and silver are perfect for small investors. Yes, there are mark-ups on partial bars, circles, and coins, but anyone looking to buy an ounce or more of silver or gold pays only a small mark-up on the spot price.
Handle any size with the global online gold investment service BullionVault №1, with 55,000 clients who have invested between $ 100 and $ 100,000 +.
The government and banks control the price of precious metals so that no one can make a profit.
There have been instances where banks have tried (note this word) to manipulate global spot metal prices for a very short period, but this action has almost nothing to do with the gain or loss that small investors receive. The truth is that the gold bullion market is driven largely by supply and demand. So if many buyers want gold, for example, the price will go up. Both large and small investors have made profits and suffered losses in the precious metals market.
It is better to buy stocks for profit as they bring higher returns.
Under certain rare conditions, gold and silver reserves perform much better than the metals themselves, but most of the time, investors with gold or silver in bullion do better than those with mining reserves. Particularly in the downstream market, mining stocks tend to decline faster and farther away from physical metals.
Storage is a major problem for the physical owners of precious metals.
Storage is a minor issue whether it’s a traditional safe or a home safe, although the latter isn’t recommended by experts. (Today’s high-tech thieves use metal detectors to quickly find internal hiding places for investment-grade metal, so it’s usually wiser to use a secure metal storage method.) However, renting a room is a little cheaper. Price to keep you safe unless you pick up a massive position in gold or silver.
The other option is of course not accepting shipments of precious metals at all. There are many inexpensive storage options. For example, BullionVault allows you to keep bars in professional markets around the world. Additionally, they only collect 0.12% per annum on gold deposits, which is less than the management fees charged by many ETFs, for example.
It is best to buy rare “investment” coins made of gold or silver, not raw bullion.
Nothing could be further from the truth than the persistent myth that predates these many questionable coins. If someone is not a numismatic expert and is comfortable buying and selling rare coins, jewelry is the way to go. Rare coins have a large markup which makes it more likely to buy works of art than precious metals. Yes, coin traders will repeat this myth like clockwork when asked. But think about the source! Stick to boring old metal bars, rods, or government publications.
Gold and silver, as well as platinum and palladium, are only useful as “counter” hedges in a larger portfolio of stocks, bonds, and other investments.
The word “only” makes the above statement a destructive myth. Yes, metals can be a good part of a well-diversified portfolio, but many investors invest most of their money in precious metals. Long-term metal investors, also known as “stackers”, buy gold and silver on a monthly, weekly, or annual basis, and get what their budget buys for a price. While using the metal as a standard 10 percent hedge in a larger portfolio is a laudable practice, there is nothing wrong with making the precious metal a key component of a well-managed investment strategy.
The government can confiscate metals at any time.
It falls into the financial myth category of the “tin hat” category. Even when President Franklin Roosevelt oversaw a ban on private ownership of gold in the 1930s, the US government did not raid vaults. Most of the gold accidentally changed. The big change is the fact that brokers and dealers are no longer allowed to sell to individuals. Also, the dollar was backed by gold in those days, so the government had a vested interest in how much gold was in private hands. Today’s investors may also fear the devaluation of the national currency as a much bigger and more realistic threat than the confiscation of gold.
Every investment has its risks and benefits. This is expected. However, in a world of so-called “alternative markets” such as precious metals, there are often mysteries that must be solved before consumers can confidently buy. It pays big dividends for spending more time exploring alternative investment opportunities before putting his hard-earned dollars on the table.