Whether you’re a beginner investor or have years of experience, one investment you may not have considered is adding gold and silver to your portfolio. These precious metals have had an allure for hundreds of years, but have recently become even more popular as an investment because they offer a unique advantage: providing diversification to your portfolio.
Gold and silver can stand strong even in turbulent markets, typically moving oppositionally to other types of investing assets. This makes them a shield against economic uncertainties while safeguarding your purchasing power during periods of inflation.
Before diving into the world of gold and silver investments, though, you may want to explore your options. While it can take some time to grasp the various avenues for investing in these precious metals, the potential rewards are well worth the effort, no matter your financial objectives or experience level.
How to buy gold and silver
Here are a few common ways to invest in gold and silver today:
Save for retirement with a gold or silver IRA
A gold IRA (individual retirement account) or a silver IRA can be useful for investing in precious metals for retirement. These self-directed IRAs let you hold physical gold, silver or other assets in an account that qualifies for the tax advantages of a regular IRA.
Because not all financial services companies offer gold or silver IRAs, you may need to open a new account even if you have an existing IRA — but you probably don’t have to open separate accounts if you want to buy both types of metals. Another option is investing in assets like gold ETFs through your regular IRA, rather than physical gold.
Fees can be higher for specialized IRAs compared with regular IRAs. You may take on one-time account setup fees, annual management fees and even separate storage fees for the custodian that keeps your gold bullion. However, fees for gold IRAs and silver IRAs can vary, based on a number of factors.
Before you buy in, keep in mind that precious metals can be risky as you near retirement. Although gold investing can be smart for investors of all ages, it may be better for younger ones.
Buy into gold or silver ETFs
If you’re already familiar with traditional investing, one of the easiest ways to buy gold or silver is through exchange-traded funds (ETFs). Gold ETFs and silver ETFs essentially trade like regular stocks through your stock brokerage.
The ETF provider typically holds physical gold or silver bullion and the value of those precious metals is reflected in the ETF’s share price. This method also allows you to avoid the cost of storing physical goldyourself. The ETF provider may charge a small annual fee to manage the fund. Gold ETFs are generally in the ballpark of 0.20-0.40% of assets, while silver ETF fees may run slightly higher.
Consider individual gold or silver mining stocks
Another way to invest in gold or silver without buying gold bars and coins is to get exposure via stock in mining companies. This is more of an indirect investment. In theory, if precious metals prices go up, then companies that mine those metals would also increase in value. But a number of additional factors can go into stock prices, depending on how these companies operate.
You can buy stock in specific mining companies, much as you would trade tech stocks, for instance. Or, you can buy an ETF that invests in a variety of gold or silver mining companies (or perhaps both). Fees for mining ETFs may cost a bit more than bullion ETFs.
Stick with physical gold or silver
Another option for investing in gold or silver is buying physical bullion. This includes gold bars and gold coins or silver bars and coins. Bars and coins can sometimes have designs or images on them, for which they may be considered collectibles.
Some companies sell physical gold and silver online and ship the bullion to you. However, this may be more expensive than other forms of buying precious metals. You can also find some physical stores that buy and sell gold and silver, but you also will often pay a premium there. The prices of physical goldand silver for purchase may be significantly higher than the current trading price, or spot price, of the commodities.
After purchasing, you must also figure out how to safely store the bullion. Depending on the amount you buy, this could be as simple as a safe in your home or incur added costs for storage at a depository.
Investing in Gold and Silver ETFs and Mutual Funds
Buying silver and gold through financial instruments changes some of the risks–storage and insurance is someone else’s problem–but it also means you no longer have an investment you can touch. There are numerous gold and silver funds that investors have access to today, many of which can be purchased using traditional brokerage accounts.
Some funds are proxies for direct ownership of silver or gold, holding only bullion of those specific metals, while others cover the sector more broadly with some percentage held in other precious metals. The goal of these funds is to mimic the price movements of a specific precious metals index or a specific metal’s price. Some funds are mainly holding physical gold and the price moves up and down in sync with the benchmark price. Other funds may try to mimic the benchmark price of silver or gold using a mix of physical gold, options, and futures. The performance of these funds will, of course, be reduced by the expense ratio of the fund and the more active a fund’s strategy is, the more it will cost.
Gold and silver funds can be thought of as an investment in precious metals without the actual hassle of storing, buying, or selling them. The fund structure allows for more liquidity in that you can easily add or subtract from your gold or silver holdings without having to get items verified and physically shipped around the dealer network. Gold and silver funds aren’t direct investments, however, and they sometimes will not track exactly with the price of physical gold. That said, they do still provide investors with the diversification of physical gold or silver without the carrying costs.
When we talk about gold and silver funds, we are speaking specifically about funds that provide exposure to physical gold and silver bars but are much more liquid because of the ability to trade shares across global markets. There are also funds that invest in the stocks of companies mining deposits of these precious metals. We will take a closer look at these investments next.
The bottom line
Buying alternative assets like precious metals can help you withstand economic fluctuations over time. There are many ways to buy gold and silver, so consider what your goal is with these investments before picking a path. If you like the idea of physically owning gold or silver coins, for example, then you might go down that route, but if you prefer the liquidity and relative ease of trading stocks, then you might buy an ETF or shares of mining companies.
Consider consulting with a financial advisor or trusted professional to see what’s right for you.
