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Strategic Metals Investing

Jun 30

As a popular asset class, precious metals offer investors diversification, liquidity and the potential for protection against inflation. They are also known for their relative stability in turbulent times, which may make them an important addition to an investment portfolio.

Many investors prefer to own physical precious metals, such as gold, silver and platinum. But the purchase of physical metal requires significant upfront capital and can carry storage and insurance costs. As a result, many choose to acquire these assets through other methods such as commodities futures, an exchange-sized bar mutual funds and exchange-traded funds (ETFs).

ETFs are one of the most popular ways to gain exposure to the metals. ETFs offer the liquidity and convenience of shares, and are designed to track the price movements of a specific commodity or group of commodities. ETFs offer investors an opportunity to invest in the commodities market without purchasing and storing physical metals, and can be either actively- or passively-managed.

Investors should determine their goals and exit strategy when deciding what to buy and when to sell. A professional financial advisor can help you determine which precious metal is best suited for your needs: For example, gold might be better suited for long-term investments, while silver might be more suitable for shorter- to mid-term objectives. Platinum might be an excellent choice if you’re looking for portfolio diversification, exposure to industrial demand and the potential for price appreciation, while palladium might be ideal if you’re interested in auto-catalysts and supply constraints.

A closed-end fund that offers a physical redemption feature, such as Money Metals, combines the liquidity and cost efficiency of an ETF with the security and convenience of owning physical bullion. These funds can be redeemed for the physical bullion they hold, and are typically offered at a discount or premium to their net asset value depending on investor demand. These funds are also subject to management fees, and their underlying investments may be volatile. **For U.S. federal income tax purposes, please refer to the prospectus for any of these funds and consult with your own personal tax adviser regarding your individual circumstances.

Mining company stocks and mutual funds offer exposure to the price movements of the various precious metals, and can be a good option for investors familiar with buying and selling traditional equities. However, these investments can be more influenced by overall market pressures than the price of the underlying metal.

Money Metals of which investment vehicle you decide to use, it’s important to stay away from pushy salespeople who try to sell you physical precious metals. Such tactics can be a red flag for fraud and are often employed by companies who do not have your best interests at heart. In particular, avoid unsolicited telephone calls from people urging you to act quickly and tell you that supplies are limited.