Diversification Through Precious Metal Mutual Funds

Making an investment in a precious metal market, such as gold market or silver market has always been very profitable but a few years ago, the scenario changed as speculation in the precious metal market was followed by unexpected fluctuations and trends that were never observed before. Investors suffered huge losses and market took an unexpected turn with the introduction of metal paper trading that caused manipulation in a precious metal market as people started buying metal papers instead of real metal.

To reduce the risk of loss on precious metal investments, precious metal mutual funds played a vital role to secure the investors and helped them generate profits on their ic cnvestments. It provides one of the safest ways to invest in precious metals. Mutual fund managers invest your money through mutual funds into specific shares and bonds in a precious metal market and hence, diversify your investments without any workload on your part. By investing in a precious metal mutual fund, an investor faces less volatility and risk than he usually does if he invests in an open metal market. However, as with every investment, you should discuss your options with Your Personal Financial Mentor before investing in mutual funds because there is always a risk of unstable market trends.

Precious metals, such as gold and silver always look good but there is more to gold than just a bling bling. Making an investment in a precious metal mutual fund can be very lucrative and can yield high returns, especially in a declining economy because it offers a mean of making money without suffering losses, through diversification.

In an unstable market, diversification is the key and this is what mutual funds do best. The compensation of a mutual fund manager is tied to the performance of a fund and they take a considerable amount of time to choose a balanced variety of securities, such as bonds and stocks that work well in combination so that if the value of one stock goes down, several other securities should perform well and hence, stabilize the fund’s earnings. However, investment in mutual funds in a precious metal market may not generate higher returns as compared to new hot securities, but your investment will be safe in the long run. Moreover, these mutual funds further diversify an investor’s portfolio as they invest in stocks for multiple precious metals.

When an investor makes an investment, there is no guarantee that it will generate high returns. In fact, he can lose all of his money in a single investment. It has been observed in the past that there were large price swings in a precious metal market. A long boom cycle is followed by sharp bust and a long bust cycle continues before going it goes up again. Precious metal mutual funds help distribute the risk evenly in a portfolio and therefore, it is less likely that they face disastrous monetary losses. Because of the high price volatility in a precious metal market, it is recommended by many experts that you should not put more than 10 percent of your portfolio in precious metal mutual funds. 

Categories: Precious Metals Market

Leave a Reply

Your email address will not be published. Required fields are marked *

July 30, 2013 Diversification Through Precious Metal Mutual Funds