Have you been looking at investing in gold and silver? If so, you’ve probably been confused by the number of choices available to you. Do you even know what your options are? What makes gold and silver different from other investments? Silver is not as easy to learn about as gold. Here we will look at the similarities and differences between gold and silver, and why investing in either makes sense.
As an investor, the most important thing to understand is that gold and silver tend to be a safe investment at all times. It is why many investors are turning to them for an alternative to paper stocks and government bonds. Traditional precious metals are typically a safe hedge against stock market turbulence. This is also still true in bear markets.
Another reason that investing in gold and silver makes sense is that there are not as many risks involved as with other investments. Commodities trade futures, which involve buying commodities and agreeing to sell them at a certain date in the future. You don’t own the commodities until you have bought them; they become your security when you pay for them. This allows you to protect your cash flows in case of unanticipated events.
There are some risk factors inherent in investing in gold and silver. Any commodity produces cash flows only when you sell it or buy it. Gold and silver both do not have physical commodity futures stores. Therefore, their production cannot be guaranteed by any futures market, like the NYSE, Basket Commodity Trading Commission (BCTC) or the Chicago Board of Trade (CBOT).
Since physical gold and silver cannot be guaranteed, investors need other ways to secure their cash. The most popular way to do this is through creating a diversified portfolio, consisting of both safe, traditional investment types and less-safe but higher yielding options. Portfolio diversification is more effective than relying on one particular investment to replace other investments. A well-diversified portfolio minimizes the risk of loss due to unfavorable market fluctuations, while increasing the potential for increased returns.
In order to create a diversified portfolio, an investor must invest in a wide range of higher-yielding, safe commodities such as gold and silver. An index tracking the prices of these two precious metals, the Gold Miners Index, is the best way for investors to monitor price changes on a regular basis and invest in only those investments that will benefit them in the long term. Investors should also seek to obtain margin or collateral for the major purchase or sell of gold or silver. While bullion coins are a common form of investment, they have high fees and are not always practical for a wide variety of investors.
Individual investors can use special financial products to increase their portfolio holdings in gold. The most popular form of investing in gold is in standard gold futures and options contracts. While these products do not offer the same degree of safety as a diversified portfolio, they are still a good way for an investor to hedge his or her portfolio against inflation-corrected investments in the United States. By hedging against inflation-corrected future gold prices, investors might also protect themselves from government over-leveraging or excessive government printing of money, which could lead to excessive global debt.
There are many ways to invest in gold and silver, but they all share one important principle: diversification is the key. Ensuring that all of an investor’s portfolio is not weighed down by a single investment option does not limit the investor’s options; instead, it ensures that all of the investor’s funds are invested in all of the safest investment opportunities. Diversification is the only way to truly protect an investor’s portfolio against inflation-corrected asset values. Knowing when and how to invest in gold and silver is an important part of managing one’s portfolio to ensure long-term success.
