Precious Metals Investing: A Beginners Guide to a Recession-Friendly Portfolio

The world economy has been struggling to recover from a recession of epic proportions since at least the end of 2007, when plummeting housing prices pulled the rug out from underneath the worlds biggest banks. In the years that have followed, the U.S. government has tried to spur growth and investment by cutting interest rates to historic levels essentially near zero. That has had at least a modest positive impact on the economy, but the recovery remains weak. The prospect of raising those interest rates will surely need to be addressed soon, and that could lead to even greater uncertainty for economic recovery over the next few years.

While stocks have been a major gamble during this time, and real estate investment has sunk to new lows, a few options have remained quite strong for consumers. One of the best is precious metals investing, which allows consumers a chance to tie their financial wellbeing to the price of precious metals like gold, silver, platinum, and palladium. Bullion coins and bars have become quite common among those who have room to store them, and theyre viewed as a way to beat the recession and earn a high return no matter the policies enacted by the Federal Reserve. Before engaging in this type of investment, though, it pays to know a few key things that could make a big difference in the price of an investment and its eventual return.

Consider the Value and History of Each Precious Metal Prior to Purchase

Like all investments, precious metals require potential investors to conduct a pretty moderate amount of research before taking the plunge. Not all of these metals are as promising in terms of value as so-called yellow metals are. Gold alone has had the best record in recent years of maintaining or increasing its value. Platinum, too, has increased in recent years, although it is well off its 2008 high of over $2,000 per ounce.

Silver, while often considered a good investment for long-term needs, can prevent at least a few complications. Unlike gold and platinum, silver is as valuable in construction applications as it is in jewelry, investing, and other more recreational uses. That can cause its value to swing quite a bit in each direction, making it a gamble that can really pay off for investors, but requires close monitoring.

Be sure to understand the recent history of each potential precious metal before investing. Look at its performance domestically and abroad, and learn about the factors that affect how each metals value can increase or decrease with changes in the market. With this knowledge available, buying the right coins, bars, or other investment products, will be far easier to do.

Understand Minimum Investment Requirements and Payment Mechanisms

The major companies that offer precious metals investing services to consumers often require at least a small minimum investment in order to open an account and get their customers started with this growing industry. Typically, that means that consumers will have to buy at least a minimum number of bars, coins, or investment products from the company that theyve chosen to deal with, in order to consult with an advisor and earn a return on their investments. Thats not a big deal, though, because most people are looking to invest quite a bit more than the minimum level permitted by trading agencies.

Sites all around the Internet, like Monex.com and many others, typically offer a number of different ways to pay. Consumers are able to buy their bullion coins or bars outright using cash, or they can opt for a financing account that allows for the purchase of those metals over time. Secure storage options are also offered by many of these companies, which will give them the ability to remotely store any purchased metals while they accrue value and produce a solid return for those who buy them.

Each method has a number of pros and cons, so be sure to understand the exact options offered by a trading company and how each of them might benefit the investment. Consult with an advisor who can recommend the best way to own precious metals and turn them into a solid, long-term investment.

If Not Storing Remotely, Create a Safe Storage Area At Home

Precious metals are precious for a reason. Their supply is limited, they are highly in demand, and they represent a significant financial benefit for anyone who owns them. With that kind of reputation, its pretty easy to see why the more nefarious members of todays society would be inclined to steal them and use them for their own financial gain. While many companies offer remote storage for purchased coins and bars, many consumers do prefer to keep their investments where they can see them and check on them regularly, largely to maintain their own peace of mind.

Consumers who wish to keep their investments at or near their home should make sure that any storage area is highly secure and away from the publics view. Burglaries happen all the time and, while the theft of things like home electronics is bad, the theft of precious metals would be exponentially worse. Consider a safe within a secondary room of the home, and be sure to share the combination only with those who absolutely require it. With a secure approach to storage, long-term investments can be safe from financially damaging theft.

Understand the Reasons for Choosing Precious Metals Over Other Products

Finally, its worth noting that the real benefits of precious metals investing should be understood before purchasing them. Just like consumers seek to understand the pros and cons of investing in stocks, bonds, or other funds, the perks of precious metals help to pick a sound investment strategy that will really pay off in the long run. Perhaps the best reason to pick these products over others is that they are safeguarded from any type of inflation. Whereas stocks and bonds are controlled by the value of currency, gold and other precious metals cannot simply be printed to keep up with demand, interest rates, or other economic problems.

Furthermore, their lack of inflationary volatility makes them an excellent way to guard an investment portfolio against future economic uncertainty. While stocks and bonds will wildly fluctuate in value, precious metals will remain relatively stable or, in most cases, positive. Thats a huge benefit that shouldnt be ignored by consumers who are looking for both short-term and long-term profitability after their purchase.

Finally, consider the diversification value of precious metals. The correlation of precious metal value is generally low, or even negative, when compared to the value of things like stocks, bonds, and certificates. As those things decrease in value, gold can increase in value, offsetting economic problems and keeping a portfolios value high even when the stock market has sunk to new lows.

With Research and Understanding, a Sound Investment Strategy

Because precious metals provide excellent protection against economy uncertainty and inflationary concerns, theyre the perfect way to diversify a portfolio, round out an investment strategy, and build long-term wealth that wont succumb to inflation rates and financial panics. That gives consumers valuable peace of mind, a commodity that is especially important in an economic climate like the one America finds itself in today.

Sources:

www.forbes.com/2010/06/22/investing-precious-metals-personal-finance-gold.html