Investing In Precious Metals: 6 Potential Risks to Avoid

An investment in precious metals could be very beneficial, however, if not planned properly, it can leave you in huge losses too. Therefore, the best option would be to remain cautious while investing. If this is your first-time investment in precious metals, then here are some common mistakes to avoid:

Investing for Short-Term

Before investing, try to evaluate the reasons for your investment. If you are thinking of making quick-money, then you should not invest in precious commodities, such as physical metals or rare stones, because this investment gives a decent return only after a long period. Thus, if you’re thinking of investing in precious metals, then you should be prepared for long-term investment.

The rates of gold have hiked between 2001 and 2011, from $375 per ounce to $1900 per ounce; however, it had happened over a period of 10 years, which is a long period. There are many websites that offer you options of buying precious metals online, such as GoldStackers. You can go to these websites and learn about all the benefits that they offer.

Forgetting the limitations of IRA (for American readers)

One of the greatest merits of investing in precious metals via the IRA is that you get a safe storage option for your investments. What is the self-directed IRA? IRA stands for Individual Retirement Account and offers you alternative options for investment in your retirement account. Moreover, it is a tax-advantaged investing tool.

No doubt, an investment in precious metals could prove to be a very good decision for securing retirement funds. However, it is still a long-term investment plan, which should not be overestimated if you are still young.

Investing Too Much

One of the most common mistakes you could make is investing too much into precious metals without estimating the potential risks associated with them.

If you are a first-time investor and the huge Return on Investment (ROI) from this investment lures you, then beware, as you might be miscalculating the amount of risk.

Why risk?

You could check the fluctuations in gold rates in the last few years. No doubt, it did jump from 966.90 AUD in 2008 to 1460.35 AUD in 2010. However, it did suffer a massive fall between the years 2012 and 2013, when the rates had fallen to 1352.28 AUD from 1563.50 AUD.

You can gain enormous benefits from it but can suffer enormous losses too. Putting all your money into one commodity has never been a good idea, and it is not good with precious metals too.

Instead of making one big investment, you can make small investments in diverse precious metals to see how the market moves.

Buying Scrap Gold and Silver

There are chances that an item of gold or silver might possess some inherent worth, but this does not always hold true. For instance, a gold necklace with diamonds would not bear the same value after a few years as a diamond has no investment usefulness. Therefore, if it is your first-time investment in precious metals, then you should not invest in junk silver or familial jewellery. Instead, you should save your money to invest in minted precious metals, such as bullion bars, coins, and rounds.

Buying From Unverified Sellers

Bargaining is a common practice. It is very natural to search for the lowest price of a particular commodity. Now, suppose you met a dealer. He offers you a piece of bullion at a very low price. The offer could be tempting. What would you do? Well, do not jump on conclusions!

The cheap bullion, coins, and rounds could be impure. Therefore, to avoid such frauds one should always buy precious metals from a certified seller.

Investing With Little Research

One must always do thorough research on a commodity and its market share before investing in it. There are numerous books and blogs which provide information on different methods of research. You should educate yourself on how to study the fluctuations in the rates of precious metals, and only then should you make the investment.