Investing In Precious Metals: What You Need To Know
Ever wondered why precious metals like gold, silver, and platinum are so valuable? It’s because they are rare and produced in limited quantities.
While ealier these metals were used as currencies and were symbolic of social status, they are still valued the same.
If you are planning to invest in precious metals, you’ve made the right choice. In fact, these investments are highly lucrative and the ideal types to add more diversity to your portfolio.
Here is all that you need to know about investing in precious metals:
What Are Your Investment Goals?
What is your long-term vision? Each type of precious metal comes with its own strategic benefits. Having your long term vision in front of you will give you a head start.
There are different reasons why people invest in precious metals. Some may want to capitalize on an immediate opportunity. Others wish to have enough passive income revenue streams for their retirement. The key to making the right decision lies in choosing the right metal.
What Are Some Of The Ways In Which You Can Invest?
There are different ways in which you can invest in precious metals. You can purchase physical assets like gold bars and coins or you can opt for a future contract.
In order to better understand future contracts let’s take a look at the following example;
You have the option of purchasing a gold bar at $100 right now. You know in three months time the value of the bar will go up. You decide to enter a future contract and lock the prices.
Let’s say three months later the price of gold is $125. You will make a profit of $25 since you had already signed a future contract, three months back that allowed you to purchase the bar at $100.
Before you invest in metals, you might want to know certain pricing terms like spot price, premium, and spread.
Spot price refers to the price of the metal on paper. It varies from time to time. This is the price at which the commodity is traded in the market.
Premium on the other hand refers to any additional costs you might have to pay apart from the actual price of the metal. These include fabrication and brokerage fees.
Spread refers to the difference between the actual price and the bid price. This amount also incorporates expenses like brokerage fees along with the premiums.
How Much Should You Invest In Metals?
This entirely depends on you. Experts suggest that you allocate one third of your funds to metals. You can turn to professionals for further guidance regarding the management of your portfolio.