The Covid-19 Pandemic caused a wave of uncertainty that resulted in people looking for other options for investing their hard-earned finances.
There are two alternatives that are becoming increasingly popular, namely precious metals and cryptocurrency, the reasons being that both are distinct and successful in their own right.
However, there is still a dispute among investors of all levels, as to whether it is best to invest in precious metals like silver and gold, or cryptocurrencies like Ethereum and Bitcoin.
It can be somewhat overwhelming to choose where to invest your money, so it makes sense to examine how we can benefit from both.
What, Exactly, Are Precious Metals?
Precious metals are a long-established way of investing, with people investing their money for centuries, into valuables such as gold, platinum, and silver. It is this stability that makes some investors think of precious metals as a “safe” form of investment. Precious metals are also frequently used to manufacture motor vehicles, jewellery, and more.
Investment metals are those rare metals with outstanding economic value. Their high worth comes from their scarcity, their function as an asset, as well as the high demand for them in the industrial sector.
Gold, silver, platinum, and palladium are the four precious metals most commonly used for investment purposes. Gold has performed particularly well over the last 20 years with a 7 X increase in value.
The Benefits Of Investing In Precious Metals?
Following are some of the reasons why investing in precious metals can financially be extremely rewarding.
- Scarcity – precious metals are a limited resource, and their increased use in the production industry has resulted in them becoming even more popular to investors. Buying precious metals now increases the chances of enjoying the maximum return in the long term.
- They Are Considered “Safe-Haven” Assets - precious metal prices fluctuate during times of heightened uncertainty, unlike other investments that suffer losses. Investors see precious metals as safe-haven assets and consider them to be an excellent addition to any investment portfolio.
- Diversity - the saying “don’t put your eggs into one basket” is appropriate when it comes to investing. Investing in precious metals allows you to diversify your portfolio of investments. You can invest in gold, platinum, and silver, and get different returns.
- Privacy - precious metals are investable assets that are perfect for you if you want privacy and confidentiality. There is no need for external monitoring or fees, and no financial organizations need to get involved.
What Are The Risks Involved With Investing In Precious Metals?
Like other investments, there are also certain risks involved when investing in precious metals. Although they do give strong returns and can be used to accumulate wealth, they are not suited to all investors, for the following reasons:
They Are Volatile
Market action determines the price of precious metals, so they tend to fluctuate. The market value can fall lower than the price you paid for it – similar to the rise and fall action of a seesaw. So, depending on when you decide to sell, you might find that you get fewer returns than the purchase price.
Capital Gains Tax
Although precious metals can be sold when their value increases, you must bear in mind that you could be taxed on your returns. You might have to pay Capital Gains Tax, depending on where you live. However, you will only have to pay tax if you intend to sell your precious metal investment for cash.
The term “digital gold” is used to describe cryptocurrencies, thanks to prominent names such as New York Mellon and Elon Musk investing in Bitcoin and other cryptocurrencies.
You’d be hard-pressed to find anyone who has not heard of “cryptocurrencies”!
Even though it is a volatile investment option that frightens the life out of many people, if done correctly, crypto investments can generate significant returns.
Following are some of the benefits of investing in cryptocurrency.
- Direct Control – with crypto investments you have total independence and control since banks and other financial institutions do not have to be involved at all.
- Transparent – every transaction of cryptocurrency is monitored and recorded with Blockchain technology in an entirely transparent. Therefore, once transactions are made, they cannot be hacked, changed, or cancelled.
- Simplicity – the procedure for cryptocurrency investment is simple, unlike stocks and other assets that take time to complete. Everything is carried out digitally, eliminating the need to visit banks or sign agreements.
What Are The Challenges Of Crypto?
Blockchain technology is a decentralized system that tracks the transactions of digital assets and is used by many cryptocurrencies. Despite the technology being complicated, the development of infrastructure to boost versatility has created certain vulnerabilities.
In order to cope with global demand, cryptocurrencies such as Bitcoin depend on off-chain transactions, where users buy and sell coins outside the network of blockchain. By doing so, the whole purpose of using the technology in the first place is effectively undermined.
Although off-chain transactions are meant to get around the limits of blockchain, they, in fact, result in security faults because they can be altered prior to being written back into the blockchain, thus paving the way for foul play with investors’ money.
Plenty of time and energy is also taken up when processing blockchain transactions, which has been found to be inefficient. In a study conducted at the beginning of the year, it was discovered that Bitcoin used more electricity in one year than the whole of Argentina!
Despite this huge energy consumption, however, less than 10 transactions are written per second. This resulted in critics saying that it was due to the impulsive environmental damage caused by cryptocurrency miners, for an asset that was merely speculative.
A Fundamental Part Of The Crypto World Is Instability
Unlike precious metals, cryptocurrencies have no natural value and being a vehicle of exchange is the only purpose they serve. In addition, they are considered to be investment assets with people from all walks of life, including both casual and serious investors dabbling in crypto to see what returns they can receive. This results in cryptocurrencies remaining extremely unpredictable, with people rushing to invest when it is fashionable and plunging when individuals sell their investments.
For instance, between February and March last year, Bitcoin’s price halved. By the end of the year, their prices quadrupled, set record-high prices in January, and then plummeted just a few months later, by 15%!
On the other hand, physical precious metals are found everywhere, including in electrical devices, medical equipment, jewellery, and many other places. This means, therefore, that there is always a demand for precious metals, which helps to keep the prices of precious metals comparatively stable.
Using The Best Of Both Worlds To Make Better Investment Choices
Value investing, apart from being an investment strategy, is also a life philosophy when it comes down to it. With a value mindset, you can think about it without the things that mainstream media are trying to force you to believe, or the hype that surrounds it.
Investors are free to choose both, or one of the two, depending on their financial position, their tolerance to risk, and if they are in it for the short or long term.
Both precious metals and cryptocurrencies have their advantages and disadvantages. According to the experts, investors should include both in their investment portfolios, to help give them protection against inflation.
The benefits of cryptocurrencies and precious metals are not the same. It is important to bear in mind the risks surrounding cryptocurrency investment and that the market can be exceptionally volatile.
Have a look at cryptocurrency prices over the past few months. The prices can plunge to rock-bottom with a simple tweet. The volatile crypto market over the past ten years has prompted more and more consumers to opt for precious metals investment, which is deemed as “safe haven” investments.
Bullion metals like silver and gold are found in a wide variety of investment portfolios, due to their ability to ride the waves in all types of economic turbulence.
Precious metals are widely considered to be an economic asset all over the world because they act as a buffer against unreliability in the future. In addition to this, they are extremely liquid and can be used in exchanges, thus creating a clear path for fast and efficient exchanges, as well as liquidations, if necessary.
With all the talk about whether precious metals or cryptocurrencies make a better investment, it is easy to forget that there is the third option of including both groups in your investment portfolio and enjoying the advantages that both have to offer.
We buy gold or silver for top prices here at Vintage Tom and Charles Hart Jewellers, so please get in touch if you wish to sell your unwanted gold or silver.