The main benefit of investing in gold or silver comes from their value as a hedge against inflation. History makes it clear that inflation has an adverse effect on the stock and bond markets, as well as on people’s savings.
Precious metals tend to increase in value in an environment of high inflation and economic uncertainty. When the value of a 100% stock market investment portfolio falls, the rise in the price of precious metals can probably offset the loss of the other investments goldco review. This is what we know in finance as “coverage”.
The purpose of the hedge is to protect the value of our core investment portfolio against uncertainty, inflation and money printing that drives down financial markets.
How to invest in gold and silver
If we are interested in investing in precious metals, we can start with these three ways:
Buy physical gold or silver bars and coins
In this alternative we have the option of having actual ownership of our precious metals, eliminating counterparty risk . In many cases, and if the quantities we have are significant, it is recommended that they be stored by a third party to limit the risk of theft. Gold and silver coins have both value due to their weight and their history (numismatic), which means two ways to obtain extra benefits.
Invest in gold or silver ETFs
The second option for investing in gold or silver is using gold or silver exchange-traded funds (ETFs). ETFs can be physically replicated (they have gold reserves stored in a bank and the value of the ETF is directly proportional to the value of these reserves) or synthetically replicated, through derivatives such as gold futures.
This is probably the easiest way to invest in gold and silver. The main advantage is that they have great liquidity and can be bought or sold through a broker account. This allows us an easy readjustment of the portfolio and a cheap and uncomplicated buying/selling process . Historically, these ETFs have been somewhat expensive, but they are becoming cheaper. Some of the top gold and silver ETFs are:
ETFs de oro:
- SPDR Gold Trust (GLD), expense ratio: 0.40%.
- iShares Gold Trust (IAU), expense ratio: 0.25%.
- SPDR Gold MiniShares Trust (GLDM), expense ratio: 0.18%.
- Aberdeen Physical Gold Shares ETF (SGOL), expense ratio: 0.17%.
- Sprott Physical Gold Trust (PHYS), expense ratio: 0.46%.
- Perth Mint Physical Gold ETF (AAAU), expense ratio: 0.18%.
Payment ETFs:
- iShares Silver Trust (SLV), expense ratio: 0.50%.
- Aberdeen Physical Silver Shares ETF (SIVR), expense ratio: 0.30%.
- Sprott Physical Silver Trust (PSLV), expense ratio: 0.67%.
Buying shares of gold or silver mining companies
A third alternative to have exposure to gold or silver is to purchase shares of mining companies of these metals. There is a wide variety of gold and silver mining companies on the market in which we can invest.
The advantage of shares of mining companies is that, in theory, they can avoid many of the problems of investing in precious metals. While precious metals do not produce cash flows and cost money to manage, miners do produce cash flows and often pay dividends.
However, gold miners are leveraged against the gold price. While the price of gold can double or halve over a period of several years in extreme cases (from, for example, $800 per ounce to $1,600 per ounce, or vice versa), mining stock prices Gold prices can rise or fall between 5 and 10 times. Therefore, before buying a share of a gold miner, we must do an in-depth analysis to know the risk we are assuming and the volatility we are willing to assume.