Common Precious Metal Investing Errors and How to Avoid Them
Did you know that the precious metals market is projected to reach $254.3 billion by 2027?
Precious metals are a haven for investors as they hedge against inflation. And, they’re a safer alternative to bonds when there are global political tensions.
So, it’s not surprising that many investors rush towards precious metals. But, the precious metals market is quite complex, especially for new investors.
You run a high risk of making precious metal investing errors that’ll cost you a fortune. The good news is that most of these mistakes are avoidable with proper guidance.
Read on for common errors and how to avoid them.
Not Doing Your Research
Russia-Ukraine tensions are making daily headlines worldwide. As expected, investors are buying palladium, anticipating shortages arising from sanctions on Russia.
There was a six percent rise in palladium prices in February alone. So, you may be tempted to join the wagon of investors and invest in the metal.
While this could prove lucrative, it’s also quite risky. Remember, most experienced investors have already diversified their precious metals portfolios.
You should too, and this calls for intensive research. Understand all your precious metal options before investing in palladium. Know which combinations will present the highest payoff and lowest risk.
photo/ Hans Braxmeier
Concentrating on One Investment
Many new precious metal investors invest large portions of their savings at once. Some have already done so in light of the increasing global political tensions.
Sure, precious metals are low-risk, making them a better alternative to other investments. But, low-risk doesn’t imply an absence of risk. You’ll need to create an informed precious metal investment strategy to reduce your risk.
Ideally, your strategy should involve various precious metals. To start with, set aside a part of your savings to invest in silver, platinum, and gold. Then, observe their value over time before investing more of your savings.
Buying from unverified Dealers
Technology has revolutionized investments by allowing investors to transact over the internet. But, this convenience carries risks as fake dealers often scam new investors. You may end up buying fake metals or not getting any at all if you’re not careful.
It’s essential to look into any seller before buying precious metals from them. How long have they been selling the metals? How are their customer reviews?
Do they have a physical location? Are their prices reasonable, or are they too good to be true?
You may be tempted to buy metals from cheap sellers to increase your return on investment. But, it’s not worth the risk as they may be selling impure precious metals.
Overlooking RRSP Benefits
Investors also assume that owning precious metals is enough. But, you can increase your payoffs by creating a Registered Retirement Savings Plan (RRSP) portfolio.
This portfolio secures your future as it contributes to your retirement funds. All you’ll need to do is pay an annual flat fee for the portfolio and enjoy your retirement when the time comes.
Buying Scrap Metals
Some new investors confuse precious metal investments for scrap metal purchases. Buying jewelry made from precious metals is not as lucrative as buying metals themselves.
Sure, you may make some money selling the jewelry in the future, but it won’t be as significant as other investments. Buy bullions, coins, and bars in place of jewelry to make a killing in this market.
Having Short-Term Goals
New precious metal investors have one thing in common. They look at precious metals as speculative assets. Many treat the metals like stocks, believing that they’ll appreciate fast.
And, the current palladium situation isn’t helping matters. Palladium’s consistent appreciation has investors looking at precious metals as short-term investments.
But, this is an extraordinary situation that’s no doubt temporary. Precious metals are different from other investments. You shouldn’t sell and buy them regularly, expecting to make high profits.
They’re best looked at as long-term investments. That’s why they’re best placed in retirement portfolios. Your precious metals should be a means of diversifying your investment portfolio.
Overlooking Premium Charges
Investors forget that precious metals are like other commodities in some aspects. One of these aspects is the cost. Like other commodities, you incur more than just the initial cost.
You’ll also incur maintenance charges, which affect your precious metal investment profits. Ensure you understand what you’re getting into before buying any metal.
Research the costs associated with each and determine their effects on returns. This way, you won’t invest in metals that’ll cost you more than you stand to gain.
Confusing Exchange Traded Funds for Physical Assets
Some new investors don’t know the difference between ETFs and physical metals. This causes a lot of confusion when they decide to sell their assets.
Physical metals are recognized worldwide, meaning you can easily get money for them. Also, you can sell them as you’re their recognized owner.
However, you can’t sell metals on EFTs as you’re not their owner. Instead, only managers of an EFT can sell its metals and give you your share of the investment.
Believing Sellers’ Scare Tactics
Some unscrupulous sellers deceive investors into purchasing metals by telling lies. You may come across sellers telling you to buy antique coins as they can’t be confiscated. They try to imply that the government can confiscate modern coins, which is untrue.
Don’t fall for this ploy, as you’ll end up paying a lot of money for nothing. Only buy antique coins if you’re interested in rare collections.
Grow Your Wealth by Avoiding These Precious Metal Investing Errors
The precious metal market is quite lucrative. But, making these precious metal investing errors can prevent you from enjoying its benefits.
Be sure to research your precious metal options and reliable dealers. Also, invest in various metals with a long-term strategy in mind. Doing so protects you from the volatility of the economy and guarantees profits.
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Author: Laura Brown
