Like any investment, investing in precious metals can be extremely rewarding or it can cause you to lose money. How and when you buy determines your actual costs of obtaining the investment. How and when you sell determines whether you actually made any money on the investment.
To truly master the process, you need to ignore the hype. When people are screaming about their investment losses and drops in commodity prices, that represents an ideal time to make your purchase. If you already hold a precious metal investment, then it can present an opportunity to double down on your investment, lowering your overall cost of acquiring each ounce, ETF, stock or mutual fund.
Getting into the Market
Investing in precious metals like gold and silver is often viewed favorably by women (and rappers) who like the glitz and glamor that these investments hold. They may be less excited about platinum or palladium, yet those types of investments may hold even greater rewards. Those types of metal are used in manufacturing processes, which can cause increased demand as the final products are produced in greater quantities.
You already may be aware of market risks that can change prices of these commodities. If vehicle manufacturers scale up production, the demand for platinum and palladium can increase dramatically.
There are other risks too. If striking miners in South Africa cause mining companies to miss quotas, then the prices for those raw elements could increase. If there are no problems, then an increase in supply could cause prices to drop.
Government also plays a role when examining the risks associated with investing in precious metals. What if the United States decided to reduce its gold reserves? Perhaps they feel that the full faith of the US Government is backing enough for its paper currency. Dumping that much gold on world markets would cause prices to collapse. Of course, such an event is remote and highly unlikely.
Still, a smart investor will learn to look at the different factors that could affect prices of their biggest investment holdings. To do so, avoid paying attention to flamboyant salespeople or companies that try to instill fear.
Instead, you should invest in precious metals through companies that lay out the risks and not just the rewards. They should be upfront about what types of events could cause you to lose money as well as make money. They should identify their costs, which could include transaction costs or shipping costs. There may even be storage costs involved if you want them to hold you metal in a secure location.
Investing in precious metals should be a secure process, so you really have to make sure that you have identified the proper channels for making your purchase. If an individual contacted you directly, you should be very leery about their methods and the risks involved. Therefore, you are better off doing your own research and investing in precious metals and related investment vehicles through companies that you have investigated and trust.
Investing in precious metals is likely to be a growing practice through 2014 as economic uncertainty continues to rise. Individual investors who were burned by stocks in the Great Recession are looking for alternative investments. Major investment banks and stock gurus are trying to find new methods for making money while they take profits on sales of overheated stocks.
Before you begin investing in precious metals, take the opportunity to research the methods as well as the pros and cons of each opportunity. If you do it right, you can do very well. If you rush your decision, you just might regret it.