If you are like me, you may be asking yourself, “is holding physical precious rare metals worth it”? I am sure many of us have seen the ads on TV for gold and other precious metals.
The idea is that these types of investments can offer a lot more return than stocks, bonds, or real estate. However, while they can potentially provide great returns, there are also some significant risks that people need to understand before investing in them. In this post by Rare Metal Blog will go over three primary considerations when deciding whether or not to invest in physical precious metal assets – Is Holding liquidity, safety, and diversification benefits.
The liquidity benefits
The liquidity benefits include the ability to sell your investment quickly without losing too much money. For example, precious metals like gold, silver, and platinum are considered assets with high liquidity because they can be sold quickly for cash if needed. For example, if you had big emergency bills come up that required immediate payment (e.g., car accident), then it would probably not be worth trying to find buyers of stocks or other non-liquid investments at the right price so you could meet your obligation.
The safety benefits
The safety benefits refer to protecting against market risk – meaning loss due to falling prices in the stock market or real estate markets which have caused many people financial misery over time. While precious metal values don’t always go up either, these types of assets tend not to fall as far when compared to other types of investments. For example, let’s assume you had $100,000 in gold at today’s price and the stock market falls by 50%. This means that your gold investment would now be worth -$50,000 assuming it didn’t fall as well during this period.
The diversification benefits
One final benefit is the diversification benefits which are most important for retirement plans or any long-term investment strategy where investors have saved up large sums of money over time. Putting all your eggs into one basket (e.g., stocks) can lead to catastrophic losses when things go badly since everything will tend to decline together if markets crash, as we saw in 2008/2009 after years of growth leading up to these events. In such cases, physical precious metal assets can help provide some diversification against these stock market declines.
The Final Word
While there are many possible benefits of investing in precious physical metals, they also come with significant risks that need to be considered. These include taxes (which will cut into returns), storage costs (e.g., safety deposit box rental fees or home safe required), insurance costs, and theft risk- which is a serious consideration for people who have gold jewelry lying around their house – sometimes worth more than the actual price of gold given today’s prices!