Investing in precious metals can be an excellent way to diversify your portfolio and make space for an asset other than stocks and bonds. Diversification allows you to spread risk across different asset classes, preparing your savings for different events and economic scenarios. While stocks tend to perform well during times of economic growth, other assets outperform them during recessions.

Stocks are generally considered high-risk investments, and some investors find themselves in a situation where they want to bolster low-risk assets, such as people approaching retirement and investors with considerable net worth. Bond yields in Canada have been rising, but they are still very low compared to rising inflation.

Precious metals are a compelling alternative for investors looking to really diversify their holdings. But it helps to have some pointers for investing in gold and silver before you get started. It’s important to know what you should be investing in, how to cash in your investments and the risks vs. rewards of this investment strategy.

The Basics: Gold or Silver?

For beginners, there are two primary precious metals worth focusing on: gold and silver. These make up the bulk of bullion investments. Many investors prefer to buy physical bullion in the form of bars and coins, which they can store in a safe or with a bank.

This leads to the issue of quantity. You may be able to save on the price per ounce by buying larger quantities. However, an ounce of gold is fairly expensive. For beginner investors, silver is much more affordable, and it’s easier to buy larger quantities.

Selling Your Investments

At some point, you may want or need to cash in your investments, and doing so should be reasonably easy in a timely manner. Converting gold and silver to cash can’t be done at the click of a button, but it’s reasonably easy, and, unlike bonds, you don’t have to wait a certain number of years before you have that option.

It is particularly easy to sell silver in Toronto as it is home to a number of professional bullion dealers who routinely handle gold and silver transactions. You can reliably expect to be able to sell gold and silver for a fair market price.

Risks vs. Rewards of Bullion Investing

Bullion offers several qualities that differentiate it from more traditional equities and bonds:

  • Growth and stagnation cycles that tend to be much longer than stocks, like many commodities.
  • A history of keeping up with inflation over the course of years.
  • Little correlation with the stock market, providing a quality diversification option.

When it comes to risks, you do have to consider the risks of physical theft or loss, and you may want to look into insuring gold and silver coins and bars.

Given the opportunity to diversify your portfolio, you can make your savings more resilient. Precious metals can help you expand your investment opportunities.



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Joel Levy