Hi everyone,
I’m exploring ways to diversify my portfolio and am particularly interested in precious metals investing. I’ve read a few financial articles suggesting gold and silver as a hedge against inflation, but I’m curious about the practical steps involved.
Are there specific coins, bars, or ETFs that are recommended for beginners? How do market trends affect long-term returns? I’d also like to understand risks like storage, liquidity, and market volatility.
Any advice, personal experiences, or recommended financial articles on this topic would be greatly appreciated!
Hi hinom,
First off: a warning! Much like trading, you're knocking on a door (precious metals) which, once opened, will suck you in and your life will never be the same again. Just sayin! ;-)
Are there specific coins, bars, or ETFs that are recommended for beginners?
You need to understand the difference between the paper market and the physical market, as they're chalk and cheese. If you're a trader who's attracted to precious metals (PMs) by their volatility and want to speculate for short term gains, then almost any financial vehicle (spread betting, CFDs or futures etc.) to trade a variety of instruments - either PMs themselves or ETFs - will serve their purpose.
Buying actual physical PMs is another ball game entirely. If you go down that road, you need to be very clear about why you're doing it and what you hope to get out of it. Many people in this space envisage economic collapse and fiat currency becoming worthless. So they 'stack' PMs, as gold and, to a lesser extent silver, are real money and have been universally regarded as such since the dawn of time. As you rightly point out, they also serve as a hedge against inflation. However, it's not for the short term or, even, medium term - depending how you define medium term. And it's certainly not for the faint hearted. You have only to look at the chart of gold to see why. Anyone buying the yellow metal at the start of this month is nominally sitting on a circa 20% loss! Then there are long term investors who might buy the latest limited edition coin pumped out by The Royal Mint in the hope that one day it becomes a rare collector's item. In amongst the stackers and investors are the collectors - who tend to do well because they have specialist numismatic knowledge and their timescales aren't just years - they're decades.
How do market trends affect long-term returns?
Waaaaay too complex and broad a question for me to try and answer - so I'll pass on that one. Sorry!
I’d also like to understand risks like storage, liquidity, and market volatility.
The advantage of paper over physical is there are no storage issues. Physical PMs present obvious storage risks, but there are solutions to the problem. There are any number of YouTube videos on this topic. Liquidity for physical PMs isn't a problem so long as you buy the most liquid coins and bars. An obvious - and not especially helpful comment I know - but the point is that it's not an issue - or doesn't have to be one - once you know what to acquire. And that depends on your timeframe and objectives. As a rule of thumb, stick to the coin of your country, i.e. the Britannia and sovereign here in the U.K. or the American Eagle in the U.S. Volatility is insane in PMs right now - especially siver. It's been wild since before the Iran war, due to long term artificial price suppression. But that's another story for another day.
Other risks or, rather, things you''ll need to consider, are taxes: capital gains and VAT in particular (in the U.K.) Some PMs are subject to them and some aren't. I recommend you immerse yourself in a couple of bullion dealer's websites and read their articles which are designed for newbies like you and will address things like tax. The two I recommend are:
Atkinsons and
Chards. You could take a look at
The Royal Mint - but
don't buy anything from them unless there's no one else who has what you want. They're unscrupulous sharks with a truly dreadful reputation!
There’s a YouTube channel I subscribe to called ‘Backyard Bullion’ which, IMO, is very good and the chap that runs it has provided a short series of videos, each around 12 minutes long, entitled ‘A Complete Guide to Investing & Stacking Gold & Silver’. As a ‘one-stop-shop’, he covers the basics - so I recommend you view those at your leisure:
A Complete Guide To Investing & Stacking Gold & Silver | Part 1 - Why Do You Even Want To Stack?!
PMs is a huge topic: hopefully this has provided you with a few pointers worth exploring. Lastly check out
this post.
Tim.
