The reasoning behind investing in precious metals is that it protects the investor’s portfolio against inflation. Whenever there is economic turmoil, people have historically looked to commodities such as gold. This is why gold and other precious metals have gained popularity in recent times. Finance experts have discussed this topic to great lengths, and it is quite controversial. Below is a look at what to be careful about Investing in metals.
1. Metal Markets are Manipulated
Precious metal markets are openly manipulated by major financial institutions, and even governments. This is an open secret that an individual should know if he or she plans to invest in metals. Investors who think they can jump in and out of precious metals and make a killing eventually end up learning a painful lesson. Investing in metals should only be done for the long-term. This is because the short-term manipulation of these metal’s prices usually get trumped by long-term trends, as have been observed over the last few years.
2. Physical Gold is Better than Paper Gold
When investing in gold, taking possession of physical gold is much more preferable than having a piece of paper saying that someone has invested in gold. This is because the financial system may crash one day. Should this happen, the investor may find that a piece of paper will not going to do him or her much good.
3. Precious Metals Cannot be Eaten
An individual should only invest in precious metals after he or she has put aside a sufficient emergency food supply. Being in possession of gold and silver will not be good enough should the global economy shatter completely. An investor will need a lot of food for him or her, and the family. Therefore, a person should take care of the necessities first before investing in metals.
4. Avoid Overinvesting
Just like any other investment, an individual should not put too much of his or her money into precious metals. Such a venture would be unbalanced. While overinvesting is quite risky for any asset, metals are volatile and usually offer little return. Metals may be defensive strategy. All in all, when times are good, a majority of financial experts are of the opinion that precious metals are not the best investment. For someone who wishes to invest in metals, it is advisable to limit the percentage and not invest over three percent of portfolio in them.
Any investment carries risk. The challenge is limiting capital spend to avoid getting into financial trouble.
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Investing in metals is quite different from other forms of investment. This underlines the importance of an individual getting educated before he or she gets involved. There are a number of pitfalls and hazards to be on the lookout for, some of which have been mentioned above. It is a good idea for anyone who reads this article to share it on social media. This would enable other readers who are thinking of investing in metals to know what to expect.
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