When people speak of precious metal trading they are usually referring to the purchase and sale of gold or silver. However, precious metal trading is not limited to simply physically buying gold or silver at a favorable time and stashing it on your safe, waiting for a good time to sell. There is another method, which involves buying Precious Metal Exchange Traded Funds (ETF).
An ETF is simply an investment fund that is traded in stock exchanges, pretty much similar to stocks. It combines the valuation feature of a mutual fund or unit investment trust, which can be bought or sold at the end of each trading day for their net asset values, with the tradability aspect of a closed-end fund, which trades throughout the trading day at prices that may be more or less than its net asset value. They make an attractive investment vehicle because they are usually low cost, tax-efficient and behave pretty much like stocks.
ETFs take many forms and can be hold assets like stocks, commodities or bonds. An astute reader might have guessed by now that a precious metal ETF makes a subset of commodities ETFs. Oil is another big commodity ETF. In essence, a precious metal ETF’s value is tied to the current value of the metals it holds and will rise or fall depending on the behavior of the stock.
All investment is inherently risky. It’s just that the degree of risk is different depending on how aggressive you want to be with your portfolio. When it comes to precious metal trading, the values are generally stable and usually only rise with time. For this reason a investing in precious metals either physically or via a precious metal ETF, makes for a safe and attractive investment option.
It is said that all the gold in the world would fit into a cube with sides of about 21 meters. Which is a roundabout way of saying that gold is a rare and limited resource. This rarity and limitedness is what makes precious metals like gold such attractive investment vehicles. Unless there is a sudden and drastic drop in the demand for gold, you are investing in quite a safe option. And considering that gold has only increased in value in over 6,000 years of human history, you can literally say that history teaches you that precious metal trading is the way to go.
This however, does not mean you put all your investment eggs in the precious metals trading basket. The longer you invest, the more you will find there is no such thing as an absolutely safe investment. If that were true, everyone in the world would be Warren Buffet. When investing and especially when your investment journey is just beginning, it is absolutely essential to have a balanced portfolio, with investments according to the aggressiveness you desire in your portfolio. It can be a good idea to take the advice of a seasoned friend or a professional entity like Frost International. Precious metal trading, whether physically or via ETFs, can make a part of your portfolio; however, it should never be the sole investment vehicle.