The commodities market is an exciting space. Unlike stocks, bonds and ETFs, commodities such as oil and gold tend to rise during periods of inflation, providing a critical hedge to help investors protect their wealth.
Of course, there is much to consider when investing in commodities. The precious metals market is complex, and can be challenging even for an experienced investor, so we put together a few pointers that could help you avoid making a bad investment.
#1. Do Your Homework
The first step when investing in any commodity, is to do your research. Take the time to do some homework, or you risk getting yourself into a real mess. One of the key things to educate yourself on is the associated fees with the asset you want to purchase. Compare prices, and always make sure you’re doing business with a reputable company. If you end up storing a physical commodity in your home you may want to buy a safe, and consider increasing your homeowner’s insurance.
#2. Remember the Risk
It can be easy to forget about the risks involved with investing, especially if you’re riding a wave of adrenaline from your latest win. However, despite what you may have heard on TV, the radio or Internet, there’s no such thing as a “can’t lose” investment opportunity. Even gold and silver—which have risen steadily at times and are considered by many to be reliable investments—experience dramatic price fluctuation day-by-day. Ultimately, investing is a bet, and it’s best to remember that.
#3. Silver Tends to Be More Volatile
Since the spot price of silver is lower than the spot price of gold, its price swings can appear to be less dramatic – however, in fact, silver experiences more market volatility in terms of percentage. Beginning investors often don’t realize this fact when deciding whether to purchase gold or silver bullion, or both, but the volatility of any investment is worth considering when the time comes to buy.
#4. Keep an Eye Out for Fraud
While your odds of getting duped by a fraudulent company may be small, it can still happen to the undiscerning investor. Avoid getting ripped off by buying your gold and silver from a reputable and authorized precious metal dealer. Also, be sure to check customer reviews to see what your peers have to say about the company.
#5. Plan an Exit Strategy
It’s always a good idea to know where the exits are—just in case, which is why illuminated exit signs are mandatory….”just in case.” Unfortunately, having an exit strategy is not mandatory for investors, but that doesn’t mean you shouldn’t have one. In fact, devising an exit plan in the event one of your investments goes south, is one of the very first things you should do.
Tip: Start by setting a baseline dollar figure and pledge to back out if an investment reaches that number. Establishing this rule for yourself will help reduce risk, ensure that you never put more money in than you can afford to lose, and help prevent you from making emotion-based decisions.
Now it’s your turn.
For you experienced precious metals investors out there, do you have any helpful advice or tactful tips for beginners?
Join the conversation by posting in the comments below, or on Facebook, Twitter and Google+.
