Investing in Precious Metals: Safeguarding against Economic Downturns
Especially during times of economic recession, investing in precious metals can be an effective safeguard against common financial woes. Forbes reports that gold, platinum, silver, and palladium are commonly included in investment portfolios in order to bring some stability to a volatile economy. Although investing in precious metals is not a foolproof method, as there is always risk involved, precious metals have the potential to protect your financial future.
Supply and demand
According to HowStuffWorks, there are practical reasons for the media focus on gold investment. For example, gold production dropped about 70 percent between 1980 and 2000. Under the principle of supply and demand, a decrease in supply will drive up the demand. When more people seek to purchase an item, the competition to purchase causes the price to go up. Perhaps some of the security of precious metals is the aspect of self-fulfilling prophecy. As more people invest in precious metals, the price of these metals rises, motivating even more people to add precious metals to their portfolios. If nothing else, precious metals prove a wise investment simply because so many people want to invest in them more and more.
Zacks reports that having some carefully selected precious metals in your portfolio can provide a safeguard against destabilizing currencies. Mutual funds often invest in mining companies, as well, offering diversification even within the precious metals industry. A mutual fund is a smart option, because not only does it manage when to buy and sell different investments, but it also eliminates the need to find a safe place for storing your own precious metals. For most people, it is entirely impractical to store several thousands of dollars of precious metals. A mutual fund offers both balance and practicality for such a unique investment.
Byline: This article was written by Karl Stockton for the team at FirstToKnow.com.