Out of all the parts of adulthood that are difficult to tackle, finances are perhaps the most challenging to understand and overcome. Knowing how to invest intelligently and save up for the future can be almost impossible without taking things into your own hands to learn about them.
A lot of the best tips aren’t ones that we are taught in school. In fact, in the United States, there is very little education on these topics at all. It is truly a shame. I am aiming to do my part by explaining investing in precious metals (gold in particular) and how it can diversify your investment portfolio!
What is Investing, anyway?
Before I dig into precious metals, I’ll start by describing investing for you. It can feel like a nebulous concept, after all. For a long time, all I knew was that stocks exist, and are something that grown adults talk about a lot. Naturally, it is a lot more complicated than this.
Investing is when you put your money towards a thing that you expect to bring you more money in return. The hope is to eventually turn a profit, but that might not always happen immediately. Usually, it involves purchasing assets of some sort that can give you more money than you spent.
The goal is usually to purchase an asset at one price and sell it later for a higher one. That is considered a successful venture. If this happens it is known as a capital gain!
Types of Investing
As you can imagine, there are a lot of methods you could take if you are looking to start. Each has its own perks and drawbacks, so it is a good idea to educate yourself on all of them. The big four are real estate, commodities, stocks, and bonds.
This is definitely what most of us think of when we hear the term “investing.” The stock market is a big part of our popular culture, especially in the United States. So…what is a stock?
It’s pretty simple. It is a share or equity that represents your ownership over a small fraction (or large fraction for wealthier investors) of a corporation or company. You can purchase them the own a part of the company’s assets based on how much stock you own.
You can buy, sell, and trade them on something known as a stock exchange. There are plenty of different ones out there, but the most famous is probably the New York Stock Exchange. Nowadays, there are plenty of virtual options as well.
If you are looking to get into the stock exchange, it is important to do your research. This is the best way to avoid buying into ones that have a poor history or will likely not give you a return on your purchase price. There are regulations in place for the exchange places that help with this, but consumers should always stay vigilant.
This is where investing in precious metals comes into play. They are part of this wider umbrella known as “commodities,” which are usually some sort of physical goods. Now, you can get into the gold industry by investing in stocks for companies that only deal with buying and selling gold, but that is not the primary method.
Rather, you can check out resources like Medzilla to identify strategies and where to purchase the commodity like precious metals or other things. If you are wondering why, you would choose this avenue, there are a few reasons. The primary one is to diversify your portfolio.
This is important so that you do not put all of your metaphorical eggs in one basket. After all, you don’t want to sink all of your money into one industry and lose it all in one fluctuation. These markets are highly volatile, and it is critical to remember this as you proceed.
Another perk to commodities is that they can actually serve as a hedge against inflation. If inflation is high, stocks and bonds tend to depreciate in value. However, the commodities generally do not. Sometimes, they even raise in price.
Nothing comes without risk, of course. The prices tend to change a lot in this field as supply and demand shift. That is just how a lot of material goods, especially precious metals, work. Additionally, trading in these can be quite risky – so, just be careful.
The final investment I will discuss today is a bond. If you would like to read more on this topic you can do so here: https://www.forbes.com/advisor/investing/what-is-investing/. They are a bit complicated to understand, unfortunately. For the longest time, they are what I had the hardest time wrapping my mind around.
Thankfully, in practice, they aren’t that complex. They are something called fixed-income instruments. What they represent is a loan between a borrower and an investor. Some of the most popular bonds are those offered by the United States government.
They are fractions of corporate debt that are paid off by consumers. This means they can generate interest over time, based on the principal price that was paid at the time of purchase. This makes them an interesting way to invest since they are quite stable and do not have that much risk compared to other types.
Investing Doesn’t Have to be Scary
Hopefully, some of the takeaways from this article are that you don’t need to be intimidated if you are looking to start this step on your journey to financial wellness. While some of the concepts are a bit difficult, you do not need to entirely understand them to start reaping the benefits of them.
Just make sure to do at least some research. Otherwise, you might find that you lose out on cash or your principal investment. As with most things in this field, exercise caution!