As investors, owning valuable metals is an interesting way to diversify your portfolio. Today we are going to discuss the pros and cons between stocks and precious metals to see how they can help you achieve financial goals (read more).
Investing in gold or silver is a bit different from investing in shares. When we buy shares, it means that you partially own the company, while investing in physical assets like genuine jewelry would require you to learn to trade and exchange them in a different way.
As the global economy changes due to the pandemic, the demand for lasting investments are increasing, which makes this an interesting opportunity to try. If you’re debating whether to go online or physical, you better check the pros and cons between stocks and valuable metals.
Table of Contents
Stocks And Metals: Pros And Cons
There are several advantages when you put your money in prized metals. One of them is that they are a safe investment, especially when the stock market’s volatility increases. When banks are unstable, they remain constant over long periods of time.
Another pro is that several industries use these valuable metals and the performance of the sectors influence global supply and demand for them. Some variations are also great in reducing car emissions, which some investors expect will affect future rise in price due to the limited supply of them.
All the pros look exciting, but you need to know that they also come with cons of their own – as with everything else in this world. One of these factors that can ward off retail investors is that hoarding, selling, and buying these physical goods can be challenging. Thus, finding a reputable dealer is also a big part of the game.
There are companies who help with this, such as Lear capital. If you want to know their validity, you can search ratings for Lear Capital so you can gather more data. The high demand caused by an unstable economy will also influence their prices. The high risk of theft while storing makes investing in these precious goods risky as well.
On the other hand, we have stock options.
While investors who invest in stocks may get some benefits from having partial ownership in a certain company, like the possibility of high return, historically-speaking as an asset class, stocks promise higher returns among other kinds of investment. It is also the easiest way to get shares in the company’s performance.
While the cons when choosing stocks investment is that company’s stocks are prone to be affected by market volatility and economic swings compared to valuable metals. The equities also depend on the company’s performance. If they don’t perform, do not expect a high return. The last one is the risk of not getting the money back when the company goes bankrupt.
Why is it so? Because equity investors are actually at the bottom of all investor hierarchies. When it is bankrupt, the one who gets the investment back will be shareholders first, the bondholders, and institutional investors, and the last one is equity investors.
For those who choose valuable metals as means of investment, one of the cons mentioned above is that you need safe storage for keeping them (link: https://www.cnbc.com/id/43975881). Here are some common ways to store the precious stuff you can follow.
1. Private Safe
An ideal place to put important documents like wills or birth certificates is an at-home safe. This is also a great way to store your bullions, bars, etc. The advantage is that this place keeps the silver and gold out of sight from thieves or burglars, but at the same time, it keeps them close to you.
If you have home insurance, make sure that they also cover precious metals that are put in an at-home safe. Or you may buy extra coverage for them. To make it effective, buy a safe that is fireproof and waterproof and install it in an out-of-the-way spot in your house that is still easy to access by you. Also, make sure that you don’t tell anyone you save a safe loaded with silver and gold.
2. Safe Deposit Box
Another storage option is to have a safe deposit box at a bank. Yet, before taking to this storage solution, you have to consider the following things. One thing is that your access to the safe deposit box depends on the bank’s hours. If they’re closed, you can’t quickly grab your metals savings.
Another consideration is that the bank doesn’t insure the metals you store in the deposit box. You can buy insurance, but it will be costly and can minimize the financial strength of the metals at the same time. Thus, the two next things to think about are finding which insurer wants covering metals that are placed at a bank and the expenses to rent the deposit box.
3. Third-Party Storage Firm Or Depository
The third option is depository or storing them in a third-party storage firm. You will store your valuable metals for a nominal fee in a secure facility. Compared to the other two methods, having a depository is the most secure way, especially if what you have is significant.
The benefit of this is you can have a depository in a foreign country which provides you with tax advantages. There are two options to choose from, the segregated way, where you can store metals in private storage, and allocated storage that lets customers store the precious metals in a shared compartment along with others’ valuables.