Hard Asset How To

Posted: Feb 13, 2012 12:01 AM

Many people would like to add hard assets like gold and silver to their investment portfolio but are not always clear about how exactly to go about it.  It’s easy to get confused between buying a gold and silver ETFs, gold and silver coins, and bullion.  The precious metals trade can be a little confusing and intimidating, so today I thought we could review the basics. 

The first question for most people will be how much of their wealth they be should allocating to hard assets.  Allocation is too big of an issue for one column because there are so many variables involved, including your own tolerance for risk and ability to secure valuables.  Fortunately there are some good books out there that can help you do those calculations

The next question you’ll face is what to buy.  I recommend physical possession because an ETF or gold in a vault somewhere does you absolutely no good if you need that asset in a crisis. 

Your physical gold and sliver options will be rare gold and silver coins with numismatic value, fractional silver coins without much collectible value, sometimes also called “junk silver” which can be purchased by the bag, and bullion-priced products like gold bars and silver rounds that also come in fractional sizes.  If you’re going to try making money in rare coins, I’d really recommend a lot of study before venturing into that market as it tends to be very competitive. 

The term “junk silver” is not totally fair as those are coins minted in the U.S., Canada, the U.K., and Australia with a silver content that varies from 35 percent to 90 percent.  If you stick to 90 percent silver U.S. coins, you’ll get a full troy ounce of silver for every $1.40 of face value.  Junk silver is a good choice if you’re concerned about our currency collapsing. 

The other option for precious metals would be bullion priced products like gold and silver bars, silver rounds, and fractional bars that can be as small as 5 grams. You can purchase bullion-priced precious metals many places.  I would recommend shopping competitively at both local gold and silver dealers and online.  Shipping gold and silver really isn’t that expensive and the online dealers, like APMEX, will frequently get you closer to the actual spot price. 

For storing your hard assets a good safe with a TL rating is highly recommended.  Something else to check is that, most home insurance policies will only cover about $200 in cash and precious metals in bullion or coin.  You may want to consider a rider for extended coverage or a safe deposit box if you’re going to be storing a lot of gold and sliver. 

Chris Poindexter, Senior Writer, National Gold Group, Inc