Investing in precious metals can seem like a pointless endeavor as gold and silver don’t generate interest and will not grow investments in any way. This is contrary to other asset classes that generate interest and dividends, allowing investors to steadily grow their investments and earn a passive income.
Such asset classes can be quite lucrative for investors, especially as the U.S. Federal Reserve has raised benchmark interest rates for several consecutive months and increased the potential earnings investors could earn from certain holdings.
So why would an investor who is new to the precious metals market invest their hard-earned cash in an asset class that doesn’t earn dividends or interest and won’t increase their investment?
Precious metals are an inflation hedge. One of the main reasons why seasoned investors store their money in precious metals is to protect it from inflation. Inflation is capable of reducing the value of money over time, meaning you will need more money to buy the same amount of goods and services than you needed before. With inflation and the cost of living rising across the country, investing in precious metals will allow you to preserve the value of your money and hit your long-term financial goals.
To diversify your portfolio. For investors, there is nothing as risky as putting all your eggs in the proverbial basket. Every investor is advised to diversify their portfolio and invest in a variety of stocks, mutual funds and bonds to protect themselves in case one asset class loses value.
You can choose to diversify by investing some of your savings in gold and silver. Even though these investments won’t generate any interest, they will offer you a degree of protection in case one or more of your other investments perform poorly.
To preserve your wealth. Most investors would like to preserve the wealth they have built over time. Unfortunately, even the strongest stocks underperform sometimes, meaning that your holdings are always at risk of devaluation. Not to mention the risk presented by economic upheaval and inflation that could essentially reduce the amount of money you have sitting in your accounts.
Investing in a tangible asset such as silver or gold instead of a fiat currency such as the U.S. dollar will protect your money from deflation and inflation, allowing you to preserve your wealth over time.
To pass down your wealth. Generational wealth plays a significant role in access to resources, financial security, and social mobility. If you are planning on passing on the wealth you have built to your descendants, investing in precious metals is the way to go. Countless families have used gold and silver to pass down wealth in the past, and storing your wealth in these precious metals will allow it to retain its value long after you are gone.
Many mining companies, including Hecla Mining Company (NYSE: HL), are focused on keeping the world supply of precious metals adequate, so there is no rush in doing your homework and deciding when you can or even should add these metals to your portfolio.
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