Businesses are always looking for secure ways to invest. Especially in potentially volatile markets, you want to be sure you find the wisest possible ways of investing your money. And while you don’t want to focus on any one option alone, it will be worth your while to consider the advantages of different possibilities.
In order to do this, you should do some research on the long-term stability of different kinds of assets. Having a history of stability is paramount in long-term decision-making because any number of factors can cause markets to become suddenly unstable.
Exploring the Attraction of Precious Metals in Uncertain Markets
One thing you should consider investing in is precious metals. Precious metals have a long history of stable reserve value, particularly in periods in which other assets become unreliable. We will take a look at several of the major metal types in this article and explain why these investments are wise ones.
Understanding Gold as the Traditional Safe Haven
There is a reason that the Gold Standard earned its name. Gold has long been recognized as one of the most stable metal investments, and therefore its value has remained consistent over the years. The metal contains properties that justify its historical popularity, including the fact that it does not corrode and can easily be made into coins.
Because of these exceptional qualities, gold has historically been considered a reliable hedge against inflation. Its price has tended to increase along with the cost of living. In addition, it is known to be stable during periods of deflation.
A wise investment option worth considering is to invest in a gold IRA. Gold IRAs are considered solid choices among IRA options because they provide insurance against inflation, as well as other types of market volatility. Since the 2008 financial crisis, there has been a sharp rise in the number of people who purchase them.
Silver – The Industrial and Precious Metal
When people think about investing in metals, the choice often comes down to whether potentially desirable investments are in the category of industrial or precious metals. One of the advantages of silver is that it qualifies as both.
There are some advantages to the choice of silver over gold, in fact. Silver is considered a particularly attractive option for investors who are looking for something reliable yet cheaper than gold. In addition, there is a greater amount of it in the earth’s crust, which makes it more readily available.
Silver has many practical uses, particularly in electronics. For this reason, more and more people are investing in it as they see its value potentially increasing in the future.
Platinum and Palladium – Beyond Precious Metals
The platinum “group” of metals actually consists of three types – platinum, palladium, and rhodium. Platinum is commonly used in catalytic converters, which helps to reduce emissions in automobiles. As the world focuses more and more on emissions reductions, the value of platinum is becoming increasingly clear. In addition, it is also commonly used in pacemakers.
Another advantage of platinum is that it tends to follow similar market trends to gold. When the dollar weakens, both gold and platinum tend to rise.
Palladium is a related metal with many practical uses. It is used in a variety of industries, including electronics, medicine, dentistry, and groundwater treatment. Both of these metals can be purchased either as coins or bullion.
Incorporating Precious Metals into Business Investment Strategies
Experts widely agree that a balanced investment portfolio is a wise one. Therefore, you should find the right combination of promising investments to create a larger strategy for your business.
To have a well-balanced portfolio, you should incorporate a combination of the following investments:
- Stocks, bonds, and mutual funds, in whatever combination suits your risk profile and investment goals.
- Real estate, the type and size of which also depends on your business
- Precious metals, as well as other types of commodities, such as agricultural commodities
- Other types of investments, such as private equity and venture capitalism
- Foreign exchange markets
Every portfolio is unique, and what you choose to invest in depends on your risk factors and goals. Talk to a financial advisor to determine what the right balance would be for you and your business.
Balancing Risk with Precious Metals Allocations
Despite all the many advantages of investing in precious metals, there are also some disadvantages and potential risks involved, particularly with regard to the allocations you choose. However, you can manage these risks if you take the necessary precautions before you buy.
- Unlike some forms of investment, the values of the amounts that you buy will be fixed. You will not earn interest or receive dividends from buying precious metals.
In addition, the percentage of your precious metals allocation is critical. If you have too small of a percentage allocated to metals, it will not be enough to provide you with the security that this asset offers. If you have too much, you risk falling into the type of stagnation mentioned above. Experts recommend an allocation of 5-15% devoted to precious metals.
- You should be sure that you buy from a licensed vendor as you might risk violating IRS storage regulations.
- There is some degree of liquidity risk as it can take time to withdraw and resell certain metals. Be sure that the supplier you choose offers an online storage account.
- There can be a risk of theft, so you should be sure to buy insurance for whatever metals you buy.
Choosing Between Physical Holdings and Precious Metal Funds
When you choose to invest in precious metals, you will have to decide what form you want to buy in. You can either purchase some sort of physical holding or invest in precious metal funds. We will explore both options and look at the advantages and disadvantages of each.
Bullion and Coins
Precious metal bullion is available in bars that range from one ounce to 400 ounces. They are encrusted with a stamp that serves as an official identifier of their weight and purity. If you choose to purchase in this form, be sure that you go to an established, reputable dealer as there are a lot of counterfeit outfits that are reasonably good at creating realistic-looking stamps.
Potential drawbacks of buying bullion include the risk of theft, as well as the fact that selling larger-sized bars can be difficult. It is recommended to buy multiple smaller bars, rather than fewer large ones for increased ease of liquidity.
Precious metal coins have additional features that contribute to their value. Gold coins, for example, If a coin has a particularly beautiful or rare appearance, it also possesses a numismatic value, which could appeal to collectors. At a base level, coins are priced according to their melt value, which fluctuates along with the component metal’s spot price.
Precious Metal Funds
There are different types of funds that you can invest in. Investing reduces some of the risks involved in buying physical holdings but carries the same risks associated with buying stocks or other assets subject to market fluctuations. Beyond this, funds might not track exactly the market value of the metals themselves. And although precious metal prices are less subject to extreme price volatility than many other investments, there is still some price risk involved.
Within the investment options, you can choose to invest in mutual funds, in which case you need to choose a platform for investment. You might also consider investing in mining stocks. In this case, though, you should be careful about which companies you choose because these stocks are valued differently, depending on the quality of the metals extracted.
The Future Outlook for Precious Metals in Volatile Markets
Precious metals have already indicated a stable performance in 2023, and market experts believe that this growth will continue. Gold is expected to perform better than it did in 2022. In fact, its price recently hit an all-time high, having doubled year-over-year since April 2022. In addition, there is increased demand for silver, as well as for components that include platinum.
Geopolitical uncertainty is causing people to become skittish about many types of investments. Therefore, investors are increasingly looking towards precious metals as safe havens from the potential volatility of other investments. In the longer term, these trends are likely to continue.
Conclusion
Any type of investment that you make for your business will involve a balance of advantages and potential risks. Creating a diversified portfolio that includes a mixture of precious metals, along with other types of investments will be to your advantage. This will provide you with some degree of stability, as well as the potential for growth. The choice that you make should depend on the precise allocation that you want to make to these assets. Talk to a financial advisor to determine what the right allocation is for you.