Many experienced investors all know about how solid gold, silver, and other precious are when it comes to making good investment choices. In a time where the economy is in bad shape and where almost everything in this world seems to be uncertain, precious metals are one of the few things that remain to be consistent. If used correctly, precious metals can become a diversified component of just about any investment portfolio. However, since they are investments they also come with their fair share of risks as well, although they are quite modest at best. But still though, it is still important for you to have some good knowledge about how to invest in them. |
Here are some tips on how you can invest in precious metals the right way.
Do Your Research and Choose a Futures Broker
It always helps to increase your knowledge of investing in precious metals, so doing a little bit of research will help you go a long way. As far as getting a futures broker goes, there are several of them available and each of them offer different services. Examples of these services include online brokerage (meaning you will have no assigned broker), and services where you will have a personal broker do all of the trading and answer all questions on your behalf.
Prepare a Budget for Your Investment
You obviously won’t be able to make an investment if you do not have any money with you, which is why it is important that you set aside a budget for this. Even though it is not completely necessary, it would be best if you can set aside the full purchase price for your investment. For example, if gold is averaging around $1,200 per ounce, then you should set aside at least $120,000 with your broker so you can facilitate the purchasing of 100 ounces of gold.
Note that there is a minimum amount that you must keep with your broker. This minimum amount will depend on the current market price; let’s say around 5% of the total value. This is called the “margin” and you should be informed about this by your broker.
Purchase a Futures Contract
When purchasing a futures contract, make sure to get one for the particular metal that you are interested in investing. Having a futures contract allows you to have delivery of your metal on a specific date. For instance, if you have one futures contract of gold, then you will be entitled on having 100 troy ounces of gold delivered on the months of February, April, June, or December. This will run up to five years in the future.
For silver, they are being sold in futures contracts of up to 5000 troy ounces while platinum is being sold in contracts of 50 troy ounces. Once you have this set, you can proudly add a precious metal component to your investment portfolio.
Be Mindful of Your Contract’s Expiration Date
When your contract expires, you will have the option of taking delivery of your metal. But if you do not want to exercise this option, then you can always choose to sell your contract before it expires. Remember to sell your futures contract before its expiration date. If the price has gone down, then you will be the one to shoulder the expenses of the loss. If there is a profit to be had from selling your futures contract, then your broker will be the one to provide it for you. Click here to learn about wholesale direct metals.
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