How do you see the future? These day’s investors have plenty to worry about. There is a lot of reason for concern, inflation, and slow recovery in job growth in the U.S. and competition from foreign economies just to name a few factors giving investors a headache. For some investors the answer to all these problems is to own precious metals.
The price of gold and silver has been on the up swing since 2007 when the stock market peaked. investors flock to precious metals, generally gold and silver, as stores of value to preserve their assets if paper currency depreciates. Whether silver or gold has performed better over time really depends on what 12 month period you want to spotlight. It is true that silver gained about 80% in 2010. Past performance is only one indicator to consider when looking forward.
It is important to keep in mind that precious metals like gold and silver fundamentally different then stock. When you buy stock you are buying a share of ownership in a company that produces revenue, earnings, and dividends. When you buy precious metals you are speculating. You are betting on the fact that you will be able to sell the metal to someone else in the future for more then you paid.
The percentage of your investment portfolio that you shift into precious metals depends on your future outlook. If you are reasonably confident that the future is stable then you might consider shifting say 5% to 10% of your portfolio into metals as a hedge against inflation. However, if you feel the economy is going to get a lot worse then you might make the call that you need to put a greater percentage into precious metals. Historically when stocks are down or flat and investors are nervous then metals beat stocks by a good margin. If you think stocks are in for a disappointing decade then history would suggest that precious metals are a good place to be.
It is imperative to keep in mind that silver’s 80% gain in 2010 was its best year since 1989. buying an asset after a huge gain does not always pan out that well. It is also important to note that when metals take a beating they really take a beating. Silver has seen yearly drops more then 40% of the time going back to 1990. In the past gold has also seen significant yearly losses. If you are going to invest in precious metals then treat them like any risky individual stock. Make sure you know the price at which you will sell and if the metal reaches that price get out.
Bruce Holmes is a small business advisor. Instead of Investing in precious metals consider selling them Numis Network. Build wealth by collecting wealth find out how at Numis Network.
