Investing in precious metals can be a good way to guard against inflation and diversify your portfolio, but investing in the physical metal has a number of inherent disadvantages. If you invest in gold bullion or gold bars, you will need to insure that investment and find a place to store it. Investing in gold coins introduces the risk of high markups and even fraud. Fortunately, you have other ways to invest in precious metals without facing these types of barriers.
When the price of gold, silver and other precious metals goes up, the companies that mine those metals can do quite well. Investing in those mining stocks is one way to play the precious metal market. You can find companies involved in the gold, silver and metal mining industry by using the stock screening tools available from your brokerage firm, or you can research and choose stocks on your own by reading financial publications and finding your own opportunities.
Precious Metal Mutual Funds
Mutual funds combine the money of many small investors and use that money to purchase a widely diversified basket of stocks. This approach tends to reduce the risk associated with stock market investing, while allowing investors to participate in the growth of a particular market segment. Most major mutual fund companies offer at least one fund devoted to precious metal investing, so check with your mutual fund company for a prospectus.
Exchange Traded Funds
Exchange traded funds allow investors to participate in the growth of precious metals, without the need to purchase and store the physical metal. With an ETF, you can simply purchase a single security that rises or falls along with the price of the underlying metal. The ETF that tracks the price of gold trades under the appropriate ticker symbol GLD. The silver ETF trades under ticker symbol SLV.
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