Can I invest in gold and silver? Why are those heading to their retirement years actually interested in investing in precious metals? Is it a wise decision to have a portion of retirement investment funds allocated to gold and silver? In today’s article, I will be providing you with answers to these questions, in a bid to give you an idea of what gold and silver investing entails. Let’s get right into it.
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Investing as most people know it
When you ask almost anyone about what they think investing is all about, they’ll probably tell you about purchasing shares. There’s actually no problem with this since the stock market has been the reason behind some people’s rise to wealth, as well as the growth of most countries’ economies.
Savvy investors will, however, reveal to you that the stock market is essentially a battle between the bears and bulls. In this battle, the prices usually fluctuate significantly, resulting in significant risk for the investors. To balance out such risks, seasoned investors usually look for “safe” investments that can act as a store of value, reliably.
One of the most common approaches to doing this has been investing in precious metals. Gold and silver are the most popular precious metals when it comes to investing for retirement. Platinum and palladium are also used for the same purpose, although not at the same frequency.
How can I invest in gold and silver?
Regardless of whether you decide to invest in gold or silver, or a combination of the two, you will need to know how to go about making your investment safely and legally. Some of the ways you can gain exposure to these two precious metals include:
Purchasing bullion (physical metals)
You can purchase precious metal bullion and coins, and wait for their value to increase over the years, and possibly resell them when you need to fund a project or your lifestyle. If you decide to store the precious metals in your safe, however, they may get stolen, and you may run into trouble with the IRS.
Another popular route that investors are taking nowadays is opening a gold IRA, through which one can purchase and hold precious metals in a safe IRS-approved depository. The process here may not be as simple as walking into a precious metal dealer’s store to purchase the bullion- it is, however, the best approach to invest in physical precious metals without running into trouble with the IRS.
Here are companies you can reach out to if you want to invest in gold and silver through a gold IRA.
Gold and Silver ETFs
Exchange-traded funds or ETFs are a popular option for those who are out to invest in a specified number of diversified stocks. The funds that manage ETFs usually pool funds from a large number of investors, and purchase large amounts of a given asset, in order to get an edge in the market.
As much as ETFs are mostly focused on stocks and bonds, you can get some funds that invest in precious metals. By putting some of your money into these funds, you will gain exposure to gold and silver, without necessarily having to do the buying, selling, or even the storage of physical bullion.
The downsides to owning gold and silver ETFs is that you never get to own the physical precious metals and that you meet the costs of having your ETFs managed by experts.
Buying Mining Stocks
Another approach to gaining exposure to gold and silver is through finding a blend of mining companies’ stocks. Some companies are focused on gold, others on silver, whereas some mine the two ( or more precious metals). Whether you’re interested in gaining exposure to one metal, or to the two metals, you’ll always find a suitable fit for you if you do your research well.
Investing in mining companies’ stocks not only offers you a chance to gain profits from the increase in the value of the precious metals they mine but also from the capital appreciation of the equities. Unfortunately, equities come with significant volatility risk, that is higher than that of physical bullion and the highly diversified ETFs. Not forgetting that the mining companies can end up performing poorly, even when the market is performing well, which can lead to significant losses when you should actually be reaping massively.
What are the key features of gold and silver as investment assets?
Whether you are planning on investing in gold or silver, there are a couple of factors that you need to consider. As much as both assets are perceived as being safe, and are relatively liquid, they have some differences that you should be well aware of.
As much as both precious metals are excellent investments, safety-wise, you should know that silver usually experiences more volatility, and gold is generally the more stable asset. This implies that these precious metals have different risk levels, which is why you should make a calculated move, more so if you’re getting closer to your retirement years.
When investing in safer assets, you can expect that their growth will be slower than that of other more volatile assets such as equities. That said, however, there are some slight differences that you should expect even amongst the safer assets such as gold and silver. Notably, silver has a higher potential for growth. Gold, on the other hand, experiences slower growth, but it is steady growth.
You may, however, need to consider historical data, since it informs you on the path that you should take as a long-term investor. In 2020, for instance, the value of silver went up by 20%, while that of gold went up by 25%. It is clear that gold can still grow faster than silver, even with silver having higher growth potential.
Affordability is another crucial factor to consider if you want to invest in gold and silver. If you are building a retirement investment portfolio with about $6000, allocating 10% of these funds to precious metals would leave you with $600 to purchase gold and (or) silver.
You should be aware that lower prices make silver more accessible. Gold is, on the other hand, more expensive. With a small amount of money, such as $600, in the case above, it would be better to purchase silver, since purchasing a very small amount of gold would only lead to your overall being higher (the investment would not be advantageous). It is necessary to consider all costs when deciding to invest in gold and silver so that your investment can make sense financially both in the short term and in the long term.
Below are some recommended companies you can check out as you get started with precious metal investments for your retirement years.
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I hope you now have an answer to the question “how can I invest in gold and silver”, and that you know what path to take moving forward. Let me know whether you have any more questions about investing in gold and silver- drop them in the comments section and I will get back to you ASAP.
I wish you well,
Eric, Investor and Team Member at Gold Retired!
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