Investing in precious metals like gold and silver can be a tricky business but with the right information just about anyone can do it. The first and foremost thing that any potential investor needs to do is secure their capital. Without a secure funding source for the purchase of gold and silver there is no way that investing can take place. In most cases, using something like a savings account or a separate bank account from the money that you use for every day expenses is best. It is important that you keep the money you intend to invest apart from the money that you need to live.
It is important that the money be secured in a way that it is spent only on investing, keeping investments away from money that is intended for bills is the best way to insure that you still have money to live but that you are still able to invest properly. After securing your money for the initial investment it is key to decide which precious metal you want to invest in. Gold is historically the best investment for those that are looking for a quick or rapid return. The price of gold has skyrocketed in the past few years and is now sitting at a historic high of around $1600 per ounce. Though this is the quickest way to make big bucks, it does take a bit more capitol to get started than other precious metals.
For those that are just starting out it may be beneficial to buy something like silver to start off your portfolio. Though the silver price is typically $20-$30, it is not quite as pricey as gold which makes it a great starter metal. After deciding which metal to invest in it is important to decide where your precious metals will come from. There are a few different ways to secure your investment, you can purchase from a broker, purchase from stores, or even purchase from online auction sites. With purchases that are not through a broker it is crucial that authenticity be assured prior to purchase.
With things like pawn shops and jewelry stores there is always the guarantee the metal is real and that it is not filled, plated, or even imitation. Buying from a reputable shop is always best as you can always take purchases back if a problem occurs. Buying from a shop that has a jeweler on staff is always best as they are able to accurately weigh and measure the quality of any precious metal that is being sold. For those that want to purchase online there is a great risk that these metals may not be pure. In this case it is always best to take the time to ask lots of questions about things like providence, weight, and purity to make sure that the metals you are getting are authentic.
With brokered purchases you always have the assurance that you are getting a good price on gold, and that the metals are authentic. You can ask brokers about pricing, metal purity, providence, and more with little trouble or outward effort. Brokered deals are always best for those that are unsure of the market or that are just starting out and may not know all about the ins and outs of the precious metal trade. After figuring out where you investment is coming from you need to decide how to store and protect it.
This can mean buying a safe deposit box at the bank, going through an investment company that has on site storage, or even purchasing a safe for your home. With something that is easily transportable like gold and silver it is important that they be secure at all times so that even in the case of a burglary, your items are protected and difficult for thieves to get to. Again, for those that are inexperienced it is almost always best to go through an institution that has safeguards like a bank or investment agency. Once you have a bit more experience it is possible to move investments to your home but to start out, a bit of extra security is always advised.
Investing does not have to be impossible and with a bit of knowledge just about anyone can do it. Taking the time to consider all the possibilities and taking the time to understand the trade can make a world of difference. Remember, it is okay to ask for help and asking can make all the difference.
Many investors trying to build a portfolio are very nervous about investing in commodities, largely because of the perceived risk of trading futures contracts. However, although this was the traditional route to commodity investment, in recent years a range of other investment methods have become available, at the same time as demand in many commodity sectors has increased. So now could be a good time to look at commodities investment, but some investing tips are required to minimize risk and ensure success.
The term commodities refers to a wide variety of products and raw materials, generally grouped into hard and soft. The hard group generally covers mining products, including precious metals, such as gold, silver, platinum and palladium, copper and nickel, and also oil and gas. The soft group mainly covers agricultural products, including grains, soybeans, coffee and sugar, and also cattle.
Generally, hard commodities, especially gold and silver and other precious metals, have been popular investment vehicles for the last couple of decades, during which demand has soared. The performance of these products moves in the opposite direction to that of currencies and stock markets, which have been generally depressed, and they are also seen as a hedge against inflation. The soft commodity group can also be viewed as a hedge against inflation, but they tend to be much more volatile, as their price is driven by many different factors, such as the weather. Extreme weather events can cause prices to soar, as happened to coffee in 2010-2011.
However, there are currently many reasons to invest in this sector. Annual consumption of coffee is growing at the rate of 2-3 percent globally, but in China the annual growth rate is 40 percent, and in India there is a similar dynamic. The price of sugar, which has been falling because of high production, is predicted to start to rise as production peaks. At the same time, sugar is in high demand in many countries for ethanol to use as car fuel, notably in Brazil where car sales are booming. In addition, grain prices continue to set record highs.
What is more, global finance news is showing trends that suggest this is a good time for commodity investment, especially in hard commodities. Investor confidence has been damaged in recent years by fears about slowing global economies, but in the past 18 months there has been a concerted movement towards economic stimulus by central banks of both developed and developing countries. The effects of this are beginning to be seen, particularly in China, where the PMI (Purchasing Managers Index) has shown a remarkable improvement, and PMIs are leading indicators for the performance of global natural resources stocks — these have been lagging over the past year, but in 2013 are off to a spectacular start. There seems to be every reason to take advantage of this trend.
If you are considering investing in the commodity sector, one of the most important investing tips is to evaluate the different methods of investing in these markets, and determine which suits you best. To start with, if you prefer to avoid the uncertainties of futures trading, managed futures are a good alternative. These funds are managed by professionals using a trend-following approach, investing in a diversified range of commodities, so you are exposed to major movements in commodity prices.
Another way of gaining direct exposure to commodity price fluctuations is through ETFs (Exchange Traded Funds). Some of the funds invest in just one commodity, and others go for a specific sector, so you can decide on those that attract you most. For a long-term investment, an industry-diversified selection makes most sense.
A further popular investment vehicle is commodity stocks, though you have to ensure you research the actual company as well as the market. Gold mining, oil and gas drilling stocks have proved popular investments recently, as have agricultural stocks. However, it has to be noted that agricultural stocks are considered highly unstable, with their performance being subject to many different factors including weather events.
The general advice is that commodity investments should constitute about 5-15 percent of your portfolio. However, these should not be regarded as investments for short-term gains. Commodity movements tend to take place in longer-term cycles, typically 10-18 years, so if you can choose those that are in a long-term bull market, a buy-and-hold approach is ideal.
You can indeed make a profit from commodity investing, whether you are an experienced investor or a novice. It is not the easiest sector, but provided you do your research and follow all the investing tips, there is no reason why you should not succeed. You have no need to be nervous about commodities — just choose the method that works best for you.