Precious Metal Investment
Part of any well diversified portfolio should include a portion dedicated to precious metal investment. As a general rule, about 10% to maybe 20% of one’s investable assets should be allocated to precious metals such as gold or silver. Any more than that will add unnecessary risk and cause your portfolio to become less diversified than advisable. When it comes to precious metal investments, there are a number of ways to invest. Buying the physical asset is preferred by many, while others prefer buying stocks of gold and silver mining companies. A third alternative is to purchase an ETF (Electronically Traded Fund) that moves in conjunction with the daily price of gold or other precious metal. Buying the Physical Asset Many times, the first experience someone has with precious metals is in the form of jewelry.
When you get married, you usually get a gold wedding band. While no one is saying you should sell your wedding band, it does have the potential to increase in value over the years (and become a good investment financially speaking). Other not so sentimental jewelry made of gold, silver or other precious metals can be worth a great deal of money. Most investors do not buy gold jewelry. Instead they buy gold or silver coins or bullion. They can take physical possession of their precious metal investment or, for convenience and safe keeping, leave it in their account with the firm they purchased it from. With gold selling for around $1250 per ounce these days, having a bunch of 1 ounce American Eagle gold coins lying around the house is not smart. If you insist on keeping more than a few ounces in your physical possession, it would be prudent to put them in a safety deposit box down at the bank. Buying Gold Stocks
There are a number of gold and silver stocks available on the major stock exchanges. Some of these companies are strictly in the gold business, while others have somewhat more diversified mining operations. Look for companies with a proven reserve and who have demonstrated positive results over the years. Electronically Traded Funds (ETF’s) These financial instruments act like mutual funds in that you buy shares in them and they move up and down in price with the movement of the precious metal. The advantage is that there usually is no or very low fees and the investment is very liquid.