Investing in precious metals is not only one of the most spectacular offensive plays at the present, but also a prime defensive posture as well. Individuals and nations alike are piling into precious metals for both profit and protection. For the individual investor who lacks experience in gold and silver, the good news is that there are plenty of options for finding an investment vehicle that suits them.
Investing In Precious Metals By Way Of Bullion
The most obvious, if not prudent, place to start is with physical metal. Owning bullion, in hand, is the best way to know you’ve converted financial resources to something of real value. Best of all, it has worldwide appeal. On a simple trip to Eastern Europe, you could find yourself carrying half a dozen types of paper money. In each of these various countries, however, gold and silver are widely recognized and valued.
Even within the option of owning bullion, you have options. The most basic is to hold the physical metal at home. However, there are a number of storage programs that have cropped up. You can choose from storage in allocated accounts, unallocated accounts, and there are even certificate programs backed by a government in Australia. The big decision is choosing whether to house it for yourself, have someone safeguard it on your behalf, or a combination of the two.
Investing In Precious Metals Through Bullion-Based ETFs
Investing in precious metals is very easy these days, thanks to the proliferation of exchange traded funds. Rather than buying physical bullion, which legions of folks have never even done, they can instead push a button within their online brokerage account and they are investing in precious metals as easily as buying shares of stock. The sheer volume of funds pouring into silver ETF and gold ETF products testifies to their popularity.
One of the most common ways for investing in precious metals is through the highly popular GLD and SLV ETF products. These are easily traded on the New York Stock Exchange. The primary objective is for the ETFs to mimic the price movement of the underlying physical bullion. The tracking with the underlying metal is supported by purchasing bullion and storing it in various places around the world. Note that any given ETF may use multiple locations to house metal, but it’s also true that the locations can vary from one product offering to the next. This is nice because you can choose countries that you’re more comfortable with. Investing in precious metals via ETFs will differ from holding bullion at home in that there is an expense ratio to be paid. When it’s time to pay fees, this happens by actually selling some of the bullion. When physical metal is sold to raise money to pay fees, you lose some of the ability to fully track the underlying metal price. In other words, the overall value of the fund is diminished over time, relative to what the capital could have purchased in bullion stored in your closet.