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The Pros And Cons Of Investing In Precious Metals

Investing in precious metals is relatively less known than other modes of investing. But this doesn’t mean it’s less viable. Whether you’re the kind of investor who has a lot of funds or one who’s more careful about spending on investments, there’s an opportunity for you to earn a stable return by opting for precious metals.

When you come to think of it, many decades back, before fiat money came into existence, precious metals such as gold and silver were used as a means of financial exchange. These commodities were given value, which meant that they were the currency.

With the value placed on precious metals like gold, it shouldn’t be surprising that it’s considered a good investment opportunity to look into until now. The fiat currency that people know of today has resulted in gold and other precious metals being pushed aside and becoming different forms of investment—think stocks, physical bullion or bars, and jewelry, among others. This gives investors like yourself more variety as to which investment option to go for apart from the usual stocks and real estate.

This article examines some of the pros and cons of investing in precious metals, which you can do with the help of companies like Oxford Gold. Knowing such information will allow you to determine whether this investment is right for you or not.

The Pros

There are multiple advantages that come with investing in precious metals that you may not necessarily enjoy with other kinds of investment. These include the following:

  1. It Enables You To Acquire Tangible Assets

Investing in precious metals is investing in tangible assets. Unlike other investment types like stocks, with a tangible asset, you’ve got something to hold and touch. For many investors, this is an advantage because they have something they can easily sell or trade in the event that they’re going to be in dire need of cash.

Plus, precious metals are relatively easy to keep and maintain. For as long as you store them in the proper place, you won’t have to spend for and worry about upkeep, unlike the other more common type of tangible asset: real estate.

With that said, there are many advantages that investing in tangible assets like precious metals can bring, such as these:

  • It makes for easy diversification of assets.
  • It can possibly protect against inflation.
  • It gives you personal enjoyment over being able to physically hold and see the investment you’ve so worked hard for.
  1. You Can Choose From Several Forms Of Investment

Even though precious metals are tangible assets, when you invest in them, you have the freedom to choose the kind of investment that suits your preferences and financial goals. For instance, you can either invest in precious metal certificates, physical objects like gold jewelry, or precious metal coins.

If you’re a coin collector, you can purchase coins with a precious metal percentage in them and wait for its value to increase. Apart from those, there are certificates for which you won’t receive the precious metal physically. Rather, it’s stored somewhere else on your behalf, and the certificate serves as proof of your ownership of the investment.

  1. Precious Metals Are Stores Of Value

Another advantage of investing in precious metals is that they’re stores of value. This means their value either stays the same or increases over a long period.

Precious metals aren’t exactly a defensive asset, or an asset that generates income. But if you hold on to them and allow their value to keep growing, you might be able to earn a profit out of your precious metal investments. This comes from their very nature of being the opposite of traditional asset classes. In simpler terms, their value has the potential to rise even when other assets’ value falls.

The stability of the economy isn’t always guaranteed. It may be good today, but tomorrow, the situation can change all of a sudden. If the value of your other investments is heavily affected by the state of the economy, it would do you a world of good to have stores of value such as precious metals.

  1. They May Offer Protection From Inflation

Precious metals provide inflation protection. The intrinsic value they hold makes them a hedge against inflation and economic uncertainties. When it comes to investments, intrinsic value refers to the measure of an asset’s worth. Precious metals can easily be measured for their specific value.

The protection from inflation that precious metals offer also comes from other factors such as the fact that they don’t carry credit risk. From an investment point of view, when you’ve got an asset that protects your finances from inflation, this can help establish strong financial security for you even in the future.

  1. Physical Precious Metals Cannot Be Hacked

Typically, compared to stocks and other soft assets, you’ve got more protection with physical precious metals when it comes to digital security threats. Technology is an advantage, but it’s also not without a lot of risks. Among those are hackers and scammers eyeing digital investments or stocks and savings accounts accessed through online banking.

However, if you do have precious metal investments in the form of soft assets, it pays to know some of the ways to protect your financial information from hackers:

  • Never access your investment data using public Wi-Fi. If you want to check your account for precious metals or other financial data, it’s best to do this at home with your home network.
  • Choose your apps carefully. These days, there are mobile apps for almost anything you can do online, and this is truly one of the gifts of technology: convenience. However, this convenience comes at a price in that when you sign up for any app, you’re submitting your data to different people or organizations.

If you don’t practice caution, you may end up giving your personal data to companies that aren’t even reputable. That’s why you have to be certain that every app you download for financial purposes, including investing, is trustworthy.

  • Be careful about links and attachments. Whenever you’re trying to access your investments, or you’re sent random messages and links from someone claiming to be your investment source, be mindful about what you’re going to click on. If there’s anything that seems doubtful to you, then call your financial service or investment provider to ensure that the links you see are really coming from them.
  1. Precious Metals Can Be Portable

In the event that you’re going to change residences in the future, you won’t have to worry about your precious metal investments as you might do with real estate. Since they can come in the form of soft assets, they can be portable and technically be right where you are.

What’s more, precious metals aren’t attached to a specific currency. This is unlike your savings account where if you’re traveling to another country with a different currency, then you’ve got to convert your money in it to the local currency of your new location. The value of your precious metal investments will automatically be converted come the time when you sell them for profit or add their cash value to your accounts.

  1. They Are Good Heirlooms

Precious metals are assets that can be turned into heirlooms, especially if you have children and want to help ensure their financial stability.

For example, if you leave them with USD$10,000 today, how much will that be 20 years from now when it’s time for them to use that money? What that amount can buy in the present will equate to so much less in the future. This is brought about by the effects of inflation.

Given that precious metals are often seen as a hedge against inflation, this means their value isn’t likely to decrease even after many years. Should your heirs gain ownership over your precious metal investments or decide to sell them, then they might be able to get more profit from them than if your assets were limited to cash savings or highly volatile stocks.

The Cons

While investing in precious metals comes with a number of upsides, it has its own set of drawbacks as well. These, however, aren’t meant to discourage you from going for precious metal investments. Rather, they’re meant to help you make a more informed decision by allowing you to weigh the pros and cons of investing and have adequate data to support your investment choices.

There’s no one investment that universally works for everyone. It’s up to you to look into the cons and check if the advantages outweigh the disadvantages based on your personal preferences and circumstances.

With that said, these are some of the cons of investing in precious metals:

  1. It Can Entail Extra Costs

When you purchase precious metals to invest in, depending on the kind of metal you’re after and the form it takes, there could be additional costs associated with your chosen investment. So you’ve got to be financially ready to cover them should they come up.

For instance, if you choose to invest in physical precious metals, you may have to pay for the storage fee. After all, they have to be placed in the right facility for safekeeping. If you want to have it delivered to where you are, then you’ll also have to pay for the shipping fee, which would include an insurance fee.

Before you decide on a particular type of precious metal investment, it’s advisable to check the costs beyond the price of the investment per se.

  1. It Comes With The Possibility Of Theft

This applies if your chosen investments are precious metals in their physical form. These can range from bars and bullions to coins and jewelry.

If you don’t place those in a secure storage facility or in a well-guarded part of your home, then they’re susceptible to theft. Think of how every time you wear jewelry, there’s a possibility that a thief will attempt to take it from you if you’re not careful. If something as simple as gold jewelry is enough to entice criminals, how much more tempting are gold bars and silver bullion coins?

Such unfortunate situations can be prevented if you’re wise and prudent enough to take the proper security measures at home or seek the services of a trusted storage firm.

  1. It Does Not Really Provide A Steady Flow Of Cash

When you invest in stocks, funds, or real estate, you can have liquid money coming in regularly. Usually, you’ll receive this monthly in the form of the dividends or profits from your investment. For example, if you own a piece of real estate, it’ll provide you with passive income if you rent it out. In case you need cash, it’ll be easy for you to withdraw and use the money you receive from your tenants.

With precious metals, however, any growth in their value isn’t liquid. Although you’ll be able to determine whether the value of the asset is increasing, you won’t have physical cash or liquid money coming in regularly to show for it. Because of that, precious metals won’t increase your inflow of money nor help with your expenses.

The only time you get cash in exchange for your precious metal investments is when you sell them. And depending on the kind of precious metal you have, it may not be as easy to sell it and receive cash right away as opposed to a rental from which you’re sure to have money coming in.

Conclusion

For generations, precious metals have managed to maintain their status as highly valuable commodities. That’s why if you’re a savvy investor, you’ll certainly want to consider acquiring precious metals as one of your assets. When you do so, you’ll be able to diversify your portfolio and enjoy all the advantages precious metal investments can bring. As for the disadvantages, it’s best to keep them in mind at all times so any decision you make regarding precious metals won’t harm you or your finances in the long run.

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