I've heard many financial journalists talking about investing in gold and metals such as copper. How can I look to do invest in metals?
Gold and other precious metals have soared in value recently which always increases investor interest. There are two main ways to invest in this asset class. You can either hold the investment directly or invest in it indirectly by purchasing shares in mining companies.
Direct investment in gold typically means buying Krugerrands or other gold bullion. It might even mean buying gold bars, although because these are larger they are more expensive and can be harder to sell. Keep in mind the costs involved with storage and insurance. The premiums for your home contents insurance may well go up if you keep gold in your house!
The other option, indirect investment, means investing in the shares of companies that are involved with mining gold and other precious metals. Because the profitability of these companies tends to improve when gold goes up in value, this is a way to expose your investment to the potential for growth in this asset class without directly investing in gold itself. The value of a gold mining company is often based on planned future production which is sold many years in advance, so there can be a long period of time before you start to see returns.
Investing in gold and other commodities is high risk and can be very volatile. You should be prepared to invest for at least ten year (but preferably longer) and only expose a small percentage of your total investment portfolio to this asset class. Because of the investment characteristics of gold a small investment can actually reduce the volatility in a larger portfolio through diversification.
(Information is intended for guidance only and is offered without any legal responsibility. None of the information provided constitutes any form of recommendation and is not intended to be relied upon by you in making any investment decision. You should always obtain independent professional financial advice before making any investment decisions).
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