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Strategies for Making a Precious Metals Investment

Strategies for Making a Precious Metals Investment

January 09, 2023537 view(s)

The financial industry has many excellent products to build and preserve wealth. However, commission-driven salespeople are the bridge to those products. Precious metal investments are no exception. Too many times, fast-talking salespeople need to understand the issue of why the products exist. Some salespeople become more interested in the commission than the best result for their clients. Commissions are not harmful, and by no means are all salespeople deceptive or selfish. Still, understanding commissions and assessing whether a salesperson is dedicated to your best interests is part of every investment decision.

Commissions are part of the equation, so finding non-biased investment advice can be challenging. There is an axiom, “if you want to know how someone will behave in business, figure out how they get rewarded.” Spoiler: salespeople get commissions, and some products carry higher commissions than others. Certain predictable types of salespeople will generally push you toward the higher commissioned products, which may or may not be suited for your goals.  

If the salesperson helps you reach your goals, it is worth paying the commission. However, for years, you may not know whose interest the salesperson was protecting. The best way to avoid being a salesperson's meal ticket is threefold. Decide to have specific goals, some knowledge, and rules about making investment decisions to determine if the recommendation is the best option. 


1.  Specific Goals

It cannot be understated how critical specific goals are for investing success. It is not enough to say you want to make money. The goal needs to be precise. Why do you want to make money? How much money do you want, and when do you like it? Statements like "making money" or “protecting purchasing power” are vague. It may be more appropriate to structure your strategy around more complex ideas like, "I want to make $100,000 before 2028 to pay for my child's education." Giving more details will help you decide how to allocate your capital and keep you on track.

Suppose you want to go on a road trip and don't care where you go. There is no reason to turn on the G.P.S. because every road is equally good if there isn't a destination. However, if you have a cross-country destination you want to reach, every road will not get you there, and a G.P.S. or map is essential. Just as all roads will not lead to Texas, not all investments lead to your destination. You need to know the goal and which route to take or where to turn. 

There is a popular goal-setting method called S.M.A.R.T. goals. S.M.A.R.T. goals are like your G.P.S. to help you navigate the terrain most efficiently. S.M.A.R.T. stands for specific, measurable, achievable, realistic, and time-based. Using this method creates a target to shoot at and a measuring stick for every investment strategy and recommendation. For example, a suggestion for a 30-year bond is absurd if your goal has a two-year time frame. It is pervasive for people to choose and salespeople to recommend the wrong product if goals need to be better defined. Take the time to consider your goals and why they are essential.


2.  Some Knowledge

The U.S. Gold Bureau prides itself on being the leader in precious metals education. The website is rife with articles, data, charts, and precious metal strategies, so this blog post will cover the basics of physical metals. If you want to learn more about how paper gold works, click here. There are four asset classes within precious metals, which have different levels of risk, hold times, and perform differently in market conditions. For example, bullion products will be shorter-term and volatile, whereas a Pre-33 coin will hold value remarkably well across decades. Modern-era investment coins can have some tax advantages, and rare coins have tremendous upside potential. The best strategy is diversification across the four asset classes, called the four-pillar strategy. Start here and write down your questions. We have experts ready to answer your questions at (800) 775-3504.


3.  Rules

After you have decided on your goals and learned a little about the market, you need rules. The market goes up and down, and the world can be an emotional rollercoaster. It would help if you had something to counterbalance emotion, whether you call it rules or strategies. Rules can become a predetermined "if/then" statement-making decisions for you and protect you from rash decisions. When people don't have rules, they tend to panic sell and buy when prices are high because they fear missing out. The best way to make rules starts with honesty. You will need to assess how much risk you can handle, your time frame, age, investment objectives, and other relevant factors like religious beliefs or political affiliations.

Most people have a baseline and situational rules. For example, the baseline rule is that 15% of their portfolio will always be in precious metals. A situational rule may be, "if there is at least a 40% chance of a recession within the next year, portfolio allocation will rise to 20%." An advanced situational rule could take the first rule further. It may say, "for every 10% likelihood above 40%, they would allocate an additional 2.5% to precious metals. (At the time of writing, there is a 70% recession chance in 2023  If someone had the example baseline and situational rules, they would rebalance their portfolio from 15% to 27.5%. The rule example is not investment advice, but given the likelihood of recession, you may want to create a similar rule for yourself and act upon it.)


Where to Start?

Start by deciding what you want to accomplish. What do you want to do? Different strategies exist for preparing for a barter/trade situation and setting up legacy wealth for your grandkids. Are you trying to make money or protect purchasing power? Are you trying to protect yourself from out-of-control bureaucrats? Is it a combination of different objectives? If so, which is your primary objective? Can you quantify how much you want to allocate to each goal?

Here are four questions that will help you.

1.  Why are metals a good idea?

2.  How much risk can I handle?

3.  What is my time frame?

4.  How much do I want to put into metals, and what percentage of my portfolio is it?

These 2 artcles about "How Gold Protects you" and the "4 Pillar Precious Metals Strategy" will be beneficial to get an overview of the different asset classes and how precious metals work in your portfolio. Afterward, call one of our knowledgeable precious metal experts to strategize which specific products will help you within each category best. If you understand these two articles, you will be reasonably familiar with and confident in choosing the right products to reach your goals. 

The secret to precious metal success is goals, knowledge, and rules. We can help with the knowledge and rules, but you will need to provide the goals. 

Let’s talk. (800)775-3504

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Ryan Watkins, Op-Ed ContributorbyRyan Watkins, Op-Ed Contributor
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