Kovar Capital: Investing in gold and silver

Posted

Hey Taylor: I’ve never invested in gold or silver before and I think it’s because I have no idea how it works. Any advice for a newbie? - Mark

Hey Mark: Absolutely. Metals are a nice way to diversify and you have a handful of ways to go about making the investment. Here’s my best miniature crash course.

Commodities are great. Investment portfolios mostly have our brains thinking about the stock market, but it’s really important to have a few assets that don’t care what the Dow is up to. Timber and oil are good examples of commodities that people understand because you can picture the practical use—your house is made of wood and your car drives on fuel. Precious metals don’t register as having the same usefulness, but they are undeniably important commodities across the globe. When world events shock the value of the dollar, the same doesn’t happen with gold and silver.

Uses of metals. Yes, gold jewelry is beautiful and expensive, but the practical applications go well beyond necklaces and earrings. Gold gets used in all sorts of electronic devices, from computers to television sets and cars. The conductivity of metals that makes these materials so dynamic in manufacturing also makes them very, very valuable. Silver, while much cheaper than gold, still serves as a necessary component in photography and medicine. You don’t have to factor this info into your specific investment decisions, but it’s good to have an idea of why the thing you’re buying is worth buying.

How to invest. If you want to buy bars of gold to keep in a home safe, that’s just fine. If that feels a little too rudimentary, you can buy ETFs that contain precious metals, giving you the benefit of ownership without forcing you to house the commodity. If you open a self-directed IRA, that opens you up to even more options for how you bring precious metals into your portfolio. Whatever broker you use, you should be able to figure out a way to invest that feels comfortable to you.

As long as you aren’t thinking of precious metals as a way to get rich in a hurry, it’s a great way to step outside of your traditional investments and diversify a little. You can always do more research to find out which approach you like best and then invest a sensible amount. Good luck!

Disclosure: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. To submit a question to be answered in this column, please send it via email to Question@GoFarWithKovar.com, or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.

Comments

No comments on this item Please log in to comment by clicking here