The U.S. consumer price index jumped by 7% in 2021, reaching a 39-year high. As it erodes the purchasing power of every dollar, investors are starting to look at ways to hedge against the continued soaring inflation rate. Investing in precious metals, in particular, can be a useful way to diversify your portfolio and hedge against many forms of risk while retaining and growing value.
Precious metals IRA
A precious metal IRA is a self-directed retirement account especially designed for investing in gold, silver, and other precious metals for retirement. Since precious metals grow in value over the long term, they can help protect your retirement savings. Ideally, a maximum of 5%-10% of your retirement savings should be invested in precious metals. Not only does this low figure keep your portfolio diverse and therefore minimize risk, but owning too many precious metals may also end up being less lucrative if it means you miss out on other asset classes like stocks (especially when considering reinvested dividend growth, for example).
Physical gold or silver
Purchasing physical gold or silver coins or bars is the oldest and easiest way to invest in precious metals and offers key advantages. Primarily, a physical investment is a tangible asset ideal for long-term wealth preservation. And, since it’s not digital, physical gold or silver doesn’t run the risk of being hacked or erased (unlike brokerage or bank accounts). However, if you do go down this route, you need to have secure storage in place, such as, a home safe. And, if you plan on purchasing larger quantities, you’ll eventually need to pay for professional offset storage, which involves budgeting for fees. It’s also important to make sure to purchase physical gold or silver from a reputable manufacturer. For example, if you’re looking for the best silver bars, SilverTowne is one of the oldest private reputable mints in the United States. Alternatively, Sunshine Minting is another trusted seller with their own Mint Mark SI security feature to help prevent counterfeit products.
Exchange-traded funds (ETFs)
ETFs are another easy (albeit digital) way to invest in precious metals. An ETF is a passive investment that holds physical bullion (for example, gold bullion in a gold ETF or silver bullion in a silver ETF) while tracking the price of that particular precious metal. Precious metal ETFs are traded on the stock exchange (just like other ETFs), allowing investors to profit without having to own the physical precious metal. SPDR Gold Shares, in particular, is the biggest gold ETF and is composed of gold bullion stored in bank vaults and cash. An extremely liquid investment, investors can sell their shares and convert them into cash when needed in exchange for a small 0.4% ETF expense ratio fee.
Investing in precious metals can be lucrative when done right. Precious metal IRAs, physical gold or silver, and ETFs are just some of the easiest precious metal investment options you can use to grow your wealth.