Since the global financial crisis a decade ago, investors have been cautious about putting their money into stocks and shares, knowing that these can evaporate overnight. However, investment in commodities has boomed. Tangible assets such as gold and silver maintain a steady growth over time and are not subject to the financial market’s normal volatility.
Here’s why you should be investing in precious metals.
The Need For Tangible Commodities
The economy is uncertain, but tangible assets can act as a hedge against this. Stocks and bonds are subject to the whims of the market. A physical object, on the other hand, has a natural, inherent value.
If you have ever bought a car, you will know that this is a terrible investment. Vehicles depreciate in value the moment you drive them away from the dealership. Other physical items, such as houses, tend to increase in value over time and so are sought by investors. Precious metals, such as silver bullion bars, are this kind of tangible asset. They rarely decrease in price, containing a value regardless of what is happening in the economy.
Lack of Long-Term Volatility
Non-tangible investments tend to soar and crash, apparently randomly, over time. For instance, Bitcoin has rapidly surged this year. However, Bitcoin is so volatile that any investment is a huge risk. It could just as easily crash, leaving investors with a massive loss.
While tangible assets tend to be more volatile in the short-term, they are actually far more stable over time. When averaged out in the long-term, the price of gold and silver increases in price only slightly above the rate of inflation.
As with any investment, investing in precious metals comes with some risk. This is because there are several ways of investing. Firstly, you could buy the bullions out right. By buying silver and gold bars, however, you have to pay for the physical transportation and storage, increasing fees and lowering overall profit. Alternatively, you could invest in jewellry, but the price of these items will be subject to the fashion market.
Alternatively, you can invest in a gold owning company. However, then you have the same risks as investing in any other stock. If the company is badly run, then you could lose money even if the price of gold increases.
Investing in precious metals, then, should be done as part of a wider investment strategy. It is a way of diversifying risk and ensuring you have something to fall back on if the markets crash. However, with long-term stability, it should be considered a low risk strategy.
image source: here