Precious metals are well-known, and sometimes preferred, for their price movements that can be exciting in upswings and even downswings. If you’ve been thinking about building a precious metals portfolio, it’s a great time to do so, but there are a few risks to be aware of, like fraud or high-pressure sales tactics.
Tips for Not Tarnishing Your Precious Metals Portfolio
Precious metals are a great way to diversify your investment portfolio. However, some investments are certainly much better than others. Here are a few tips from the reputable gold buyers and sellers, Gold Buyers Melbourne, to help ensure you don’t tarnish your portfolio.
Avoid Pushy Salespeople
A reputable investment expert would never push you into making an on-the-spot decision about your investments. Even if everything is above board, pressure is just inappropriate. Also, be especially cautious of unsolicited phone calls. Some persuasion tactics like promising large profits or suggesting limited quantities are used often, and they’re not above board.
Do A Background Check Before You Invest
On the whole, companies that offer precious metals as investments don’t have to be registered with any particular bodies or regulators, provided they deliver the metals within a certain time period. But, it’s still a good idea to check whether the company or salesperson is registered with any boards or have been subject to disciplinary actions in the past. A general internet search is always a good idea.
“Low Risk” Equals Alarm Bells
Never buy physical precious metals based on someone’s promise that it’s a safe investment or there’s little risk of loss. Never fall for a sales pitch along the lines that investments in physical metals isn’t risky.
Just some of the risks you could encounter include storage charges, investor loans and price fluctuations.
Always request a risk disclosure statement before you pay for anything. Also, ask for the company or salesperson’s contact details. If they’re hesitant, walk away.
Watch Out For Leverage Risk
With precious metal investments comes risky and costly use of leverage, or loans. You might pay part of the cost to invest in your precious metals and then pay for the rest on margin. The margined portion is a loan that carries interest. It’s also subject to the risk of a margin call if your investment’s value dwindles. Should a margin call happen, you may have to pay in more money to prevent your metals being liquidated.
Be Aware Of Accounting Fees
With physical precious metal investments, you may encounter account opening fees, and these can rack up into the hundreds of dollars. There are also commissions to consider, which can be as high as 15% or more of the investment. Add to that management fees, storage fees and ongoing interest on a loan, and you may find you’ll need to hear a rather high return on your investment in order to break even.
Just be aware that it can rather be daunting trying to make money on direct investments where physical precious metals are involved.
Finally, be aware of direct investments in metals that aren’t covered by some sort of investors’ protection. Typically, investments aren’t registered securities which means there’s no coverage on your brokerage account if your firm becomes insolvent.