How to Invest in Gold and Silver
Have you found yourself thinking a lot about the future and what it is that you want? Are there goals you wish to achieve, places you wish to go, or things you want to own? No matter what you’re dreaming of, you will need money to achieve them. People who are worried about the silver years of their life have begun working on a retirement plan. There are several different ways in which a person can save, but one of the most secure means of investing that has a decreased risk of losing your money, should there be an economic crisis or a stock market crash, is by investing your money in gold and silver.
Whether you are a young investor who is looking to start building their nest egg or a retiree who is relying on their retirement portfolio as a source of income, the recent changes in the stock market can make anyone nervous to invest their money. Interest rates are near a record low while the price of stocks is nearing record highs. This is hardly a coincidence and until things change for the better, the value of the stocks and bonds on the market will continue to go down in value. This has led people to look for more financially stable means of saving money for the future and growing it, and one way to do that is by investing your money in gold and silver.
Why Should You Invest in Gold and Silver?
Investing in gold and silver has many perks and a long-established history of being a great form of investment for even the most novice. While it may not have been as popular as it has been in the past, the historical legacy of having gold and silver is very well-established. Their value tends to mostly rise as time goes on, and it is their value that helps to give the stock market its value as well. No matter the size of your “treasure”, you can be assured that its value only grows over time.
Plus, precious metals are the most versatile as they can be acquired through many different means. You can purchase coins or bullions, which must be kept in a certified area by banking standards, but you can also purchase them as jewelry. In fact, over 50% of the gold that is mined for the United States is used in the jewelry industry. You can purchase it in the form of rings, bracelets, necklaces, earrings, watches, and so much more.
But the usefulness doesn’t stop there. 51% of the silver in the United States is used in even more industries. You can find it being used as electronic components in everything from TVs to alarm clocks. It is also a property used in the production of photos. You can find it being used in film since the beginning of the invention. Having real silverware was once seen as a sign of status and is now considered a lovely antique to times gone by. Also, you can find metal in jewelry for those who don’t want to wear the yellow color of gold.
The Ins and Outs of Investing in Gold vs Silver
So, which is better? Silver or gold? The historic value ratio of gold to silver has been 20:1, meaning that one ounce of gold was valued at the same as 20 ounces of silver. Most recently, the ratio has increased to that of 90:1. This comes from the fact that right now the gold trading is close to $1,500 while silver is down to $16. This may make it seem as though silver has no true value, but this is partly because it is not used as a medium of exchange in many places in the world. The value of silver has steadily grown over the years. Silver does still have its own value that makes it worth investing in. The lower price means that you can purchase more if working with a budget. Also, the use of metal for industrial purposes help keep the value as-is. That being said, there is a concern about the fact that its value is not based on a monetary position. Should there become a global economic or financial crisis, the price of silver will decline as well.
5 Best Ways to Invest in Gold and Silver
1) Gold & Silver IRA This is the best and easiest form of investing in Gold and Silver, especially if you are looking to do this for retirement reasons. You can do this by either investing new money into the account or rolling over money from an existing 401(k) or IRA into the self-directed IRA. You will have to find a custodian for the account, as you cannot be the person who manages your own account, as well as find a broker who will find the precious metals and arrange the transactions and shipment of the metal to where it will be held and maintained. This is one of the most popular ways to invest.
2) Invest in Gold and Silver Stocks and FundsThe next most popular method is to invest in the stocks and bonds of Gold and Silver. This isn’t investing in the gold stocks but in the stocks of companies that have a large investment in gold. They are companies that engage in mining gold, and their value will help increase the value of gold stock. Because of the correlation between the value of the company and the value of the metal, there is a chance that your money investment could rise at a higher rate than the metal itself.
3) Gold Mutual FundsThe gold-mining industry is a highly specialized sector that, unless you work in it and know its ins and out, investors can have a difficult time navigating and understanding the forces that will affect the stock prices. A more user-friendly form of investing in these companies is by putting your money in a mutual fund. These are accounts where the funds are managed by a person who actively buys and sells stocks in various companies. They will look for the companies that are showing the greatest future potential and invest in them to increase the amount in the account. These managers are industry professionals and can take a lot of the guesswork out of maintaining a health investment.
4) Gold Exchange Traded Funds (ETFs)For more direct investment in gold bullions, there is the option of a gold ETF. You can invest in accounts such as SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) with a gold investment company. They own gold bullions and are not mining shares. Like mutual funds, they can be acquired by using an investment broker and will be managed by them. Technically speaking, the money you invest will not give you direct ownership of the metal that you are investing in, but rather will give you shares in the metal that is owned. You will hold a position in the metal similar to you would in buying, holding, and sell any other kind of stocks, bonds, or paper assets. This will also take care of the issues of having to hold the bullion and maintain it for its value to keep its integrity.
5) Gold and Silver Bullion If you want to get away from the digital chaos that comes with investing in money and financial assets, then there is only one other avenue for you to consider: purchasing of physical gold and silver bullions. This makes it a real asset that you can have in your home or elsewhere and can sell or exchange it for something else. You can get bullions in both coin and bar form. Bars can be found in quantities ranging from 1-400 ounces. They are more suitable for those who have six to seven-figure portfolios since they occupy less space than the same amount in coins. And because they are what is used to create coins, the markup on bars is lower. For the smaller investor, aim to purchase coins instead of bars. The most popular coins available for purchase are the American Eagle, Canadian Maple Leaf, and the South African Krugerrand.
Downsides to Investing in Gold and Silver
With each perk to investing in gold and silver, there is also a disadvantage. Gold and Silver do not provide a cash flow. This means that they don’t gain interest and leaves the value of your investment to be strictly determined by the rise or fall of the metal’s value. Having stock in gold-mining companies can often be exempt from this issue as they do still pay dividends, but for the most part, they won’t earn you income when the price of either metal isn’t moving in price or devaluing. Gold sales are also temperamental. In the last 80s and 90s, the value of gold flatlines. This caused the central banks to begin selling off their reserve. When they did this, it caused the price of gold to plummet. It made the price per ounce drop to $300.
How Much Should You Invest in Gold and Silver?
With all of the facts in place, now you must figure out just how much to invest. Most experts would advise you to exercise caution and put somewhere between 5% and 10% of your portfolio in gold and silver. This will lessen the number of risks that come with putting your money in precious metals. However, should there be an economic crisis, the value of these metals will rise and create a potential safety net to help protect any other investments you may have that may fall due to the predicament. This limited investment will also minimize any future losses if the metal markets turn against you.
When is the Best Time to Invest?
Like other stocks, it is not possible to come up with the best time to invest in silver or gold. The general rule to follow is to purchase assets when they are either undervalued or in a prolonged flatline. The current market on gold and silver show that they are not being undervalued, but the markets for these precious metals have remained the same. Gold did peak for a brief time in August 2011, but it has since returned to being valued at $1500 per ounce. Based on the current market, now would be a good time to invest money into gold and silver before the value increases again and there are plenty to be found in the market today.
Final Thoughts
One of the biggest issues that investors who are looking to build a nest egg for their retirement have found is lost interest rates. These low returns are making investors nervous and choosing between one of two strategies: either to drain their own principal to cover expenses or invest even heavier in stock for greater returns. Taking money out of the principal regularly creates the potential for the investor to outlive their money, meaning that they will run out of their funds sooner than anticipated. On the flip side, investing heavily in stocks to compensate for the depletion can only cause the prospect of losing even more money in capital, especially if there is a market crash or if the market continues to remain stagnant. Investing only a small amount in gold and silver is looking to be a prudent strategy for handling the uncertain future and how it will affect the stock market. No matter where you are in life, it is important to not ignore the signs of instability.
