Monday, January 3, 2011

Precious Metals investing allocation

For those that are new to precious metals investing, you should first determine how much of your investment portfolio will be allocated to this sector.  You will also need to determine which type of metal that you will be investing in. For most people, it is Gold first, then Silver.

In an inflationary economy, most commodities will rise, some more than others. Take a look at other commodities over the past 5 months like Sugar, Corn, Cotton, Oil they are all up just like the metals.  But investing in precious metals is a form of money unlike investing in or trading other 'soft' commodities. Other metals that are rising with Gold and Silver are Platinum, Palladium, Copper and the 'rare earth' metals like Lithium.

One may want to allocate 40% of their portfolio into precious metals after studying the history of Gold and Silver and understanding what the governments around the world are doing to their fiat currency.

For quite a few people, they will allocate that 40% into physical Gold bars and coins which is and has been a safe and great investment over the past decade.  Some may want to allocate 50% physical Gold and 50% physical Silver or some percentage into both of those metals.

My current investment allocation is physical Silver, core Silver and Gold mining stocks and cash that I swing trade ETF's and miners.

If one were to choose an investment allocation like this, they can determine how much of their portfolio they want to allocate into each category. If you want to be conservative, one could place 3/4 of their portfolio into physical Gold and Silver. With the remaining 1/4, they can purchase solid Gold and Silver mining shares. When you have an allocation like this, you do not need to watch the market that much. One could get away with a check once a week with no major worries on how the financial markets are doing.

Some people like myself have the time to monitor the markets on a daily basis, so I have a certain percentage of my PM investment for 'Swing trading' ETF's and various miners. It is time consuming, so it is only for those that have the time to study miners and can apply technical analysis on an entry point and a exit point.

If you do not have the time to study the markets, it is easier to purchase physical Gold and Silver bars and coins. With the new tax laws on reporting $600 transactions, you may want to keep your purchases to 1 ounce Silver coins and bars up to 5 ounces. For Gold, one can purchase increments of the Gold Eagle coins and bars of various weights.  The US Mint produces Gold Eagles in 1/10 ounce, 1/4 ounce, 1/2 ounce and 1 ounce pieces.  When you purchase Gold in smaller quantities, you can sell small pieces of your portfolio without liquidating everything.

On a last note, Bullion Direct states that they are required by the IRS to report transactions over $10,000.

1 comment:

  1. A very good allocation suggestion. The "1 ounce silver coins and 5 ounces bars" is a very good idea. I'll keep those in mind.

    cash for gold