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Three ways to invest in precious metals

by , 23 September 2014

Holding a portion of your portfolio in gold and other precious metals like silver is like having an insurance policy against bad things happening in the market. When shares and other asset classes drop in value, gold tends to rise in price.

So if you want to have some exposure to precious metals in your portfolio, what's the best way to go about it?

Let's take a closer look…


How to invest in precious metals


#1: Invest in physical precious metals


You can buy physical gold and silver from bullion dealers. For instance, you could buy Kruger rands. You can either take delivery of the metal or for a cost, you could see if the dealer you use will store it for you.

If you take delivery of the precious metal, you need to think about the security issues of holding such a thing at home. You’d need to tell your insurance company and invest in a good safe if you don’t have one already.

Or you could store them in a safety deposit box at your bank.


#2: Invest in precious metals-backed ETFs


Exchange traded funds (ETFs) for precious metals have proven very successful over the last few years. There are quite a few to pick from as a South African investor.

By opting to invest in an ETF like NewGold or NewPlats, you have exposure to the price movements of the precious metal without taking delivery. The ETFs use the rand price of the underlying precious metal.


#3: Invest in precious metal miners


This is more risky than buying the underlying metal. And it’s more than just the price of gold and other metals which affects the share price of miners.

You’re taking on company specific risks too. If you’re investing in precious metals for the insurance portion of your portfolio, investing in mining companies doesn’t fall into this category.

So there you have it, three ways to invest in precious metals.

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Three ways to invest in precious metals
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