7 Reasons to Buy Precious Metals in 2022
Most investors first think about stocks and real estate. However, narrowing your focus can blind you from groundbreaking opportunities and protection.
Investing in additional asset types can generate higher portfolio returns and diversification. Precious metals can make a great addition to any portfolio.
Investors can select from several precious metals. Each one comes with varying benefits designed to grow and protect your portfolio.
You may have heard about these assets before. However, what makes precious metals great investments? Let’s explore seven reasons to invest in precious metals.
Table of Contents
- 1 1. Precious Metals Act as Safe Havens
- 2 2. Precious Metals Present Tangible Value
- 3 3. Volatility Enables Outsized Gains
- 4 4. Portfolio Diversification
- 5 5. Precious Metals Have Real-World Uses
- 6 6. Low Maintenance Costs
- 7 7. Precious Metals ETFs Increase Accessibility
- 8 An Ancient Asset Still Winning Over Investors
1. Precious Metals Act as Safe Havens
Precious metals provide certainty in a world of uncertainty. Their limited quantity and real-world uses ensure their value now and in the future.
Many investors view precious metals as safe havens from inflation and economic turmoil. During heightened economic uncertainty, precious metals tend to outperform popular assets.
Stocks and real estate usually outpace precious metals during a strong economy. However, those assets provide minimal protection for challenging economic times.
Inflation is out of control, rising 6.2% this year. We have not seen inflation this high since 1990.
So far, countries have taken minimal action to control inflation. The Fed continues to hold interest rates near 0%.
Raising this rate is essential for gaining control over inflation. However, increasing this rate too quickly can yield unintended consequences on the market. This situation adds economic uncertainty and a hesitancy to raise rates.
This environment creates the stage for higher inflation. Since precious metals hedge against inflation, they stand to benefit from current trends.
2. Precious Metals Present Tangible Value
Some investors like to see and touch their investments. These investors prefer the see-and-touch nature of real estate over stocks. Precious metals provide the same advantage.
You can buy silver bars, bullion, and other precious metals. Investors store their precious metals in a safe or a nearby bank’s safety deposit box.
Buying physical precious metals eliminates the risk of a middleman. When you buy stocks, you hope management keeps the company in business.
Some investors buy into contracts to seal precious metal prices. If the asset moves in your favor, you hope the other party can fulfill their end of the bargain. Not every party in a contract can properly obligate it when the time arrives.
Owning physical precious metals eliminates this problem. Instead of relying on a middleman, you get direct access to the metals.
3. Volatility Enables Outsized Gains
Did you know silver went up 142% in the first five months of the pandemic? Economic uncertainty and endless money printing contributed to silver’s incredible run.
Precious metals come with volatility. Strategic purchases can yield outsized gains. Browsing through economic reports will help you discover compelling opportunities for precious metals.
Monthly inflation and job reports give investors an idea of the economy’s direction. Negative sentiment can prop up precious metal prices.
4. Portfolio Diversification
Buying precious metals boosts your portfolio’s diversification. Many investors lean towards diversified portfolios as they lower risk.
Putting all of your eggs in a single basket gets messy if your basket has a hole. Investing in several assets spreads risk. If one of your assets underperforms, other assets can cover the difference.
Precious metals tend to perform well when stocks and real estate decline. You don’t need to load your entire portfolio with precious metals. However, a few assets can prop up your portfolio.
5. Precious Metals Have Real-World Uses
Precious metals have numerous real-world uses. While many people think of jewelry, precious metals enable innumerable services. It’s the reason people collected these precious metals for thousands of years.
Precious metals have an integral place in society. However, their prominence grows as consumers shift behavior.
Many consumers readily buy electric vehicle cars such as Teslas. People see these eco-friendly cars as the future of transportation.
The electric vehicle boom has fueled a silver boom. This precious metal works as an electrical and thermal conductor in electric vehicles.
Precious metals help us in many ways that we do not realize. Their continued usefulness suggests higher precious metal prices in the future.
6. Low Maintenance Costs
Maintenance costs can take a considerable chunk out of an asset’s profitability. You can oversee real estate yourself or hire a property manager. You’ll also need to invest in property upgrades and fixes.
While real estate maintenance costs often grow, precious metals cost little to maintain. You only need to invest in storage or a safety deposit box. These come with minimal costs compared to other assets’ maintenance costs.
Low maintenance costs let you keep more of the profits you make from trading precious metals.
7. Precious Metals ETFs Increase Accessibility
Perhaps you like precious metals, but you don’t want to store them. Physical precious metals come with exclusive perks. However, someone could steal them, and you can also lose them.
Precious Metal ETFs make these assets accessible to anyone. These ETFs give you exposure to precious metals. Instead of storing the precious metals, other people do that for you.
The ETF will come with a small fee. However, many give you diversification into various precious metals. You can quickly sell precious metals ETF shares in the market.
Some of these ETFs may provide dividends. These ETFs let you generate cash flow as your precious metals rise in value.
An Ancient Asset Still Winning Over Investors
Precious metals come with longevity on their side. They have remained a popular asset for thousands of years.
You can buy physical precious metals or invest in a precious metals ETF. If you want more great content, make sure you check out other posts on this blog.