Most of us are familiar with conventional investment vehicles such as stocks, mutual funds, exchange-traded funds or ETF, certificates of deposits and endowment funds. They are affordable and are easily available for anyone who wants to invest in them. Other investment vehicles include trading and investing in foreign currencies and commodities such as oil, wheat and precious metals including Gold and Silver bars. As a matter of fact, anything that is in demand in the global trading system can be purchased for investment. Investors do not have to hold physical investments. They can invest in options or futures and derivatives. These investments allow them to hedge or short sell against the market.
When we set out to invest our hard earned cash, one of the most important questions is how much return or profit will this investment give me. Another equally important question is how safe is this investment. What this means is weighing the costs, risks, returns and yields of the investment. Take for example, putting money into a bank savings account with interest or a certificate of deposit (CD). The costs of opening a savings account or a CD is zero. You do not have to pay the bank any administrative fees to keep your money with them. On the question of risk, all investments come with risks. The difference is what is the level of risk in each type of investment. A certificate of deposit, for example carries little risk unless the bank files for bankruptcy. However, the Federal Deposit and Insurance Corporation (FDIC) guarantees all deposits up to $250,000 per depositor. If your CD is below this amount, it will be guaranteed by the FDIC. The returns or yields on the deposit depends on the rate of interest the bank is paying you. At this time, the interest rates are at one of the lowest in history.
Therefore, many people are looking at alternative places to put their money. These include bonds, stocks as well as hedge funds. Others may invest in gold or silver. Using the criteria we have set out above, buying into stocks or bonds will involve commission fees to the broker. If you are buying into a mutual fund, there are management fees as well as administrative fees. Investing into gold or silver can involve purchasing the physical form – gold or silver bars, bullion coins, collector\’s coins – or non-physical forms – shares in gold or silver mining companies, certificates of gold or silver issued by banks who hold deposits of these metals. Like all investments, buying gold or silver involves risks. Both metals are traded in exchanges.
Their prices fluctuate up and down just like stocks. In the past ten years, gold has seen a bull run giving investors an amazing return on their investments. Silver has seen a similar boost in its traded price. Hence, if you have invested in these metals whether as gold or silver bars or in stocks of mining companies, your investment would have you laughing all the way to the bank. However, high returns also means high risks. A crash in gold or silver prices could wipe out your entire investment.