The type of investments that your business makes is critical to your overall success. You want to find investments that are secure but ones that also hold significant growth potential. Finding the right balance between these things can be tricky, but if you research the possibilities in advance, you should be able to come up with a reliable plan that will bring you results quickly.
One of the things that you should consider is investing in precious metals. Precious metals have earned their reputation as stable investment sources over many years. This article will discuss why this is and look at different types of metals to examine what each of them has to offer. Once you know what type of information to look for, you will be able to make well-grounded decisions that will help your business take off.
Definition of Precious Metals
Precious metals are metals that have a high value because of their relative scarcity, potential for use in industrial processes, and history of use as a source of value.
Historically, these metals have been used as a form of currency, although in modern times their value lies more as a hedge against inflation. Investors buy precious metals both in physical forms, such as bullion or coins. You can also invest in precious metals in non-physical forms, which we will describe below.
Types of Precious Metals
This section delves into the diverse world of precious metals, featuring gold, silver, platinum, and palladium. We'll unveil the practical aspects of investing in these valuable commodities that enable businesses to make informed decisions.
Gold is historically the most highly-valued and stable precious metal. It is for this reason that governments created the Gold Standard of currency valuation and used it during periods when other currencies become unstable.
Gold has particular properties that make it reliable, including the fact that it does not corrode and can easily be made into coins. Its value has increased over the years, and this year its value rose to an all-time high.
It is so popular, in fact, that people have created long-term investment plans around it. You can now purchase a gold IRA, for example. This type of IRA is considered a reliable choice because people believe it provides insurance against the risks of inflation. In recent years, the number of people who have invested in Gold IRAs has risen sharply.
Although not as valuable as gold, silver has also been used as a currency throughout history. Silver possesses unique value because it qualifies as both an industrial and a precious metal. In other words, it can be both decorative as well as practical.
Silver has quite a few uses in the industry. Because of its highly conductive nature, it is commonly used in electronics. Silver also has uses in medicine, the construction of solar panel systems, and other industries. These are additional reasons that investment in silver is increasing.
Platinum is often grouped together with gold in that it tends to follow similar market trends. They are both seen as safe hedges against the potential fall of the dollar, for example.
Platinum has a number of practical uses that make it an increasingly attractive investment. For one thing, it is used in catalytic converters in automobiles. It also has uses in optical fibers, turbine blades, and pacemakers.
Palladium is technically considered part of the “platinum group,” along with rhodium. Like the other metals in this category, it is also considered a safe hedge against inflation.
Palladium is used in electronics, as well as fuel cells, medical devices, dentistry, and other industries. And like platinum, it can be used in catalytic converters, as well. It is not considered as stable of an investment as gold, for example, because of the greater degree of long-term variance that it indicates. Nonetheless, it is becoming a more popular option with the growth in its practical uses.
Investing in Precious Metals for Business
Should you invest in precious metals as part of your business plan? Many businesses do consider them to be a smart component of a larger investment plan. How and to what degree you do this is important, however.
Strategies and Challenges
In considering how to strategize your precious metal investment, there are a number of factors that you should take into consideration. Each of these factors presents a unique set of challenges.
Creating a Balanced Portfolio
A balanced portfolio should consist of a variety of different types of investments, including several of the following:
- Precious metals, as well as other types of commodities, such as agricultural commodities
- Stocks, bonds, mutual funds, and possibly private equity or venture capitalism. This can include precious metal investments and/or other types.
- Real estate, the type and size of which also depends on your business
- Foreign exchange markets
In order to determine the most beneficial investment course for your business, you will need to determine the appropriate combination of risk and potential for growth that your business has. This will then help you figure out what percentage of your larger investment portfolio you should devote to precious metals.
What Type of Precious Metal Investment to Make
When it comes to your precious metal allocation specifically, you will also need to decide whether to invest in physical holdings or in funds. This includes the following possibilities:
- Exchange-traded funds or mutual funds. This includes purchasing shares of precious metal mining stocks. While there is more room for potential growth in these areas than in owning physical bullion or coins, there is also some risk involved in that the markets are subject to potential volatility.
- Futures. Futures can be a good choice if the growth trend of a particular metal is clear, although they can also be risky if a price suddenly drops.
- Certificates of ownership. Certificates of ownership are considered reliable alternatives to owning physical pieces. They possess stable value yet do not carry the risk of theft that owning bullion or coins does.
There are several emerging trends that are making these precious metals more desirable and, therefore, hotter and potentially more lucrative investment items. As we mentioned above, platinum and palladium are playing an increasingly important role in electronics manufacturing, as well as emerging medical technologies, renewable energy production, and other areas. Silver also holds great promise for increased usage across wider applications. And Gold is having its best year yet.
In addition, there is a rising demand for precious metals in jewelry production. And, of course, as the world’s economies become more unstable, people are looking more and more towards these metals as safer alternatives to more potentially volatile stocks or currencies. Therefore, this is a perfect time to invest in precious metals.
Risks and Mitigation Strategies
As mentioned above, you will need to determine what percentage of your investments you want to devote to precious metals. This can be a fair challenge as you want to be able to balance the security of precious metal investments with the growth potential for other types of investments. As precious metal holdings do not earn interest or pay dividends, they are not as potentially lucrative as stocks or other investment types.
Every business’ choice will be different. However, experts recommend allocating somewhere between 5-15% of your total portfolio value to precious metals. The precise amount will depend on your risk level and growth potential. To be on the safe side, try to make your other portfolio components ones that also have a solid history of growth. If you are investing in new stocks, be sure to seek the opinion of a financial advisor on how promising they are likely to be.
Having an investment portfolio that includes precious metals can be a wise decision. Gold, silver, platinum, and palladium are all on the rise and seeing increasing demand for different types of uses.
To stay on top of the trends and make the best choices, it is best to keep up-to-date not only with the prices of the metals themselves but also with the growth of the products in which they are used. This, combined with a carefully-planned larger strategy that includes a variety of other investment types, could be a major source of growth for your business.