As materialistic as it sounds, we really need money for current needs, but also for the future. Without it, we would not be able to live the life that the modern age brings us and enjoy all its benefits. That is why we spend money on essential needs, but also for enjoyment.
However, instant pleasures should not be the priority. The money you have now should serve as a basis for creating a secure future, and that is possible if you use it responsibly and save. But simply leaving money aside will not bring many benefits. On this link, you can find out everything about the advantages and disadvantages of savings.
That’s why it’s necessary to invest along with saving. “Employing” your money, you can increase your savings and, what’s more important, preserve their value. By making a smart choice of funds in which you will invest, you can profit at the same time and almost completely eliminate the risk of loss in case of unfavorable market events.
One of the assets that should be in your portfolio is precious metals. Recently, increased investors are turning to them, and there are many good reasons for this. The ultimate goal of each of them is financial security and a carefree future.
What Are Precious Metals?
Precious metals have long been an established way of investing, but not in the way we know them today. Gold has always been considered a symbol of prestige, silver a little less so, but generally, these shiny assets were a way to show one’s wealth. Of course, all the investment benefits of rare metals were not well known then, but the precious metal holders of that time were on the right track.
Today, that picture has finally crystallized, and numerous advantages of investing in precious metals are known. That is why they are often called investment metals. These assets include rare elements with exceptional economic value, such as gold, silver, platinum, and palladium. Recently, the last discovered one – osmium – has joined this category.
The value of precious metals stems from their scarcity, their function as assets, and the high demand in the industrial sector. For example, silver is cheap because it is not rare, but its demand is huge, especially in the high-tech industry, which slowly but surely pumps up its value.
Of course, gold is still unsurpassed, given its proven historical value and stability. Nevertheless, the new kids on the block, palladium, platinum, and osmium, show enormous potential, especially since most of their production goes toward industrial purposes (for gold, that share is only 10%).
See this link to which industries are in high demand for gold: https://www.gold.org/about-gold/gold-demand/by-sector
Reasons to Invest in Precious Metals
Precious metals, especially gold, are considered a safe haven for investors. It was and still is a support for the purchasing power of money in financially challenging times. Besides, many countries around the world keep their monetary reserves in gold. This information shows how powerful gold is as an investment tool.
Putting your money in gold, silver, and other rare elements is a long-term investment. It should maintain the value of your funds and keep you safe and sound in periods of inflation. Inflation “eats” money and makes it less valuable, while that is not the case with rare metals. When the purchasing power of fiat currency drops, gold and the rest of the precious metals stay at the same level or even rise. That has been a proven fact for centuries.
Paper money, real estate, and securities generally move in the same direction. So, if things go wrong, and you have all of the above in your portfolio, a loss is inevitable. So you need gold to resist inflation. Its value is affected by a different set of factors than the listed assets, so it will not go down at the same time. In fact, there is a greater chance that its value will increase.
Precisely because of this opposite trend, investment metals are excellent for portfolio diversification, as they act as a safety net in the event of a market crash. So, in times of crisis, you can not only preserve the value of your assets but also increase them.
How Much of Your Portfolio Should Be Precious Metal Investments\
When you know all the good sides of investing in precious metals, you probably think they should make up the largest part of your portfolio. Sure, some investors keep almost all their money in gold, thinking of it as a safe bet. It could be, but things are not that simple, as putting all your eggs in one basket is not the way to go.
Experts agree that the percentage of precious metals in your portfolio should not exceed fifteen, possibly 20 percent. Beginners should put around 10% of their savings into these alternative funds. Of course, they can increase that share later.
Generally, this percentage depends on the investors, their risk appetite, and their financial goals. If you play it safe and your main goal is security, not profit, you’ll have more in precious metals. And if you’re risk averse, you might go for other alternative investments to bring you profit. But you still should have some gold there.
How to Invest
Another advantage of investing in precious metals is that this venture does not require you to be financially savvy. Also, these assets are available, even to small investors. There are many forms of precious metals you can invest in, and depending on your choice, there are several ways to do it.
These alternative assets are mostly tangible, that is, they can be found in the form of bullion and coins. The latter is the object of interest of collectors rather than investors. That’s because only a fraction of all minted coins is eligible to be classified as investment vehicles. Of course, that doesn’t mean collecting can’t be profitable, but most people do it out of passion rather than profit.
Traditional retirement programs like 401(k) don’t allow investment in physical forms of precious metals, but only a rollover for this purpose. What is allowed are paper forms of these assets. These are mutual funds, ETFs, and shares of companies engaged in the mining and production of precious metals. Still, there is a way to invest in physical assets, as explained here.
Paper gold is still unknown to many, especially new investors, who trust tangible assets more. So, a specialized self-directed retirement account backed with these traditional assets – precious metal IRA was designed. It comes with a specific set of rules to make these transactions legal.
What Is Precious Metal IRA?
To invest following the law and pay tax for your profits, the IRS must have insight into it. According to their standards, gold, silver, and others are commodities, so they would be taxed that way if you would just keep them in your safety box at home.
That would take a significant portion of your retirement savings. Not to mention that keeping precious metals at home is a violation, for which you can be fined and prosecuted. So, the only way to hold precious metals is an IRA.
You check this article by BMOGAM on instructions to finding specialized companies that provide brokerage and custodial services. They can provide you with excellent support in this investment venture. All decisions regarding transactions with and from your IRA are yours, but you have the brokers’ assistance at any time.
Steps in IRA Investing
Opening and funding an IRA are relatively easy. The limitation regarding this account refers to how much you can contribute to it annually. Currently, the maximum is $6,000 ($7,000 if you’re over 50).
After setting up an account, you need a custodian. It’s a certified financial institution like a bank or trust company whose role is to execute all transactions at your behest. They don’t give investment advice but take the necessary actions to make these transactions legal and visible to the IRS.
After buying physical gold, silver, or something else, IRs require you to store these assets in certified depositories. That way, you can enjoy tax benefits you otherwise wouldn’t if you kept gold or other metals at home (it would be seen as withdrawal, which is subject to taxation).
A smart and responsible investment in precious metals can provide you with a secure future. There are several ways to realize that venture, and you choose the one that best suits your investment character.