Investing in gold bullion has its aesthetic appeal, but have you considered where to store it?

It depends. Gold, silver and other precious metals offer a sense of security, an insurance policy, if you will, that you will have something to fall back on if the economy crashes. If the economy is doing OK, precious metals can still be a fairly wise investment strategy, but that’s not to say it’s without risk. Precious metals are known for being volatile and quite unpredictable.

Because of this, experts say you shouldn’t tie up more than 5 percent (and certainly not more than 10 percent) of your investment money in precious metals, and you should get to know the various ways you can invest in this specialized market.

Most Common Ways to Invest in Precious Metals

Gold Bullion: Gold bullion (or bars) is pure (or almost pure) gold. You can purchase these at banks, brokerage houses and precious metals dealers, and revel in the decadence of owning gold bars. However, you should always buy from a reputable source and have the metal certified for weight and purity so you don’t get taken. Meanwhile, when you buy gold bullion you must also have a very safe place to store it (and recognize that you won’t earn interest on it). You can also buy silver bullion, platinum bullion and palladium bullion.

Numismatics: Numismatics are minted coins (in a variety of precious metals, but most commonly silver or gold) that were usually created to commemorate a special occasion. You should shop around for these coins, as mark-up will vary, as will the value of the coins depending on design and condition.

Certificates: You can buy certificates that represent your ownership of a specified quantity of gold, silver or platinum. These allow you to own precious metals without having to worry about storing the actual product.

Before investing in numismatics, be sure you are familiar with the market. The value of coins can vary widely depending on variety and condition.

Stocks and Mutual Funds: A relatively simple and safe way to invest in the precious metals market is with mutual funds. which are diversified and managed for you. Precious metals stocks are also available, but, because they are less diversified, are a bit more risky.

Futures: Futures are a contract to buy or sell precious metals for a certain price at a future point in time. While this has the potential for a large return, it is also extremely risky. Experts typically only recommend investing in precious metals futures if you are very familiar with the metals market (and are confident that you will be able to accurately predict whether values will rise or fall).

If you opt to invest in precious metals, remember that it should be looked at as a medium- to long-term investment that is primarily geared toward diversifying your portfolio.

What to Watch Out For

The safest way to invest in precious metals is with shares of a mutual fund. It will be managed for you and provides instant diversification. If you decide to buy bullion or certificates, however, be wary of high-pressure, get-rich-quick claims.

According to the United States Commodity Futures Trading Commission (CFTC), some companies that advertise on radio, television or Web sites, or make telephone cold calls to encourage you to purchase precious metals may sometimes:

Overstate their ability to predict prices

Minimize the degree of investment risk

Charge phony storage and interest fees

Investing in precious metals can be a good long-term choice, just be wary and watch out for the following scam warning signs: