A stack of solid platinum ingots on an isolated dark background - 3D render
Just about every method of bullion investing has a high level of popularity. As interest in digital investments and precious metals increased recently, though, platinum ETFs quickly gained momentum. These aren’t new asset options, but many people are discovering them for the first time.
Unfortunately, these new fans of exchange-traded funds don’t always know what they’re getting into. Their belief that they’re investing in platinum through ETFs is technically true, but these are complex securities with many nuances. Understanding them is essential for informed investing.
At Silver Gold Bull, we understand the appeal of platinum ETFs and other precious metal “paper assets.” Exchange-traded funds are certainly capable of improving your financial well-being. If you invest based solely on the word “platinum,” though, you may not get what you expect.
If you were to buy platinum bars, you’d have physical possession of bullion in your portfolio. There are many advantages to this, but some people don’t want to deal with storing precious metals. This is where exchange-traded funds come into play.
A platinum ETF is a security that tracks the price of platinum and can be bought or sold on stock exchanges. They’re structured in such a way that changes to the value of the precious metal have a direct effect on the price of the fund.
This is possible because the security acts as a basket of assets related to platinum. This could include anything from shares in mining companies to physical bullion. Unfortunately, it’s not a perfect relationship between ETF value and spot price.
Each of the following can affect the value of platinum ETFs:
Some of these factors — such as corporate decisions — have nothing to do with the price of platinum. There are also instances — such as supply interruptions — that can have an effect opposite to what you would expect.
For instance, supply interruptions in South Africa are not uncommon. This decreases supply and creates a deficit — something we’ve frequently seen recently. This can drive up the price of platinum, but an ETF that contains mining stocks may lose value.
The biggest problem with platinum ETFs, though, is that you don’t own physical bullion. Once the market closes, you have no way of trading these funds. And if a financial crisis occurs, you don’t have a physical asset to hedge against inflation. These issues don’t exist with bullion.
Platinum ETFs certainly have their disadvantages, but it’s not as if people don’t profit from them. Being fully informed about your investment decision is the most important thing. This means knowing all the options available and how they’ll fit into your financial planning.
While this section is not an endorsement for a specific exchange-traded fund, it lists some of the most popular options out there. If you’re going to invest in an ETF, start by researching the following. While they all track the same precious metal, you could see very different performances.
Each of these platinum ETFs could be profitable, but there’s no guarantee to this. A variety of factors besides precious metal value can affect these values. Additionally, some of these funds (e.g., GLTR) invest in more than just platinum.
Unfortunately, there aren’t many of these exchange-traded funds to choose from. The simple fact is that gold and silver — even with platinum’s value relative to the latter — remain the most popular precious metal investments. This means fewer choices and thus less diversity for ETFs.
Buying platinum coins and other bullion might be the best alternative to ETFs, but it certainly isn’t the only other option. If you still like the idea of paper assets, consider buying platinum stocks. These include anything from mining companies to exploration firms.
Investing in specific stocks rather than platinum ETFs lessens your portfolio’s diversification. Of course, it also provides the opportunity for larger profits if a specific company performs well. It’s still important to research any potential investment, but the following stocks are a good place to start:
While it’s possible to see bigger profits with stocks over platinum ETFs, it’s also possible to see major losses due to less diversification. Stocks also share many of the disadvantages — such as not owning physical bullion and exposure to external factors — that come along with ETFs.
Does this mean platinum stocks and exchange-traded funds are a poor investment? Absolutely not. There are a few nuances to this approach, however, that can improve your chances of success.
Platinum exchange-traded funds can be great investments when you know what you’re doing. If you choose to purchase these funds — even knowing that physical bullion has many advantages — just make sure you do your research. This can make or break an investment.
The most important rule to follow, however, is to diversify your portfolio. Remember that platinum ETFs and platinum are two different things, so it might not hurt to invest in both. It also never hurts to think about adding other precious metals or assets to your strategy.
What draws most people to these funds, however, is their relatively low price. Whereas an ounce of platinum cost around $975 when October 2021 started, you could buy a share of GraniteShares Platinum Trust for under $10.
When you invest smaller amounts, though, your returns are also smaller. Additionally, fractional platinum is available. For instance, you can buy a gram of the metal for around $40 at the same time a 1-ounce bullion bar costs over $1,000. This opens physical platinum investment up to everyone.
Every investment vehicle has its place in an effective financial strategy. After all, if platinum ETFs never returned a profit, there isn’t a person on earth who would invest in them. Unfortunately, many people lose money in these securities because they don’t fully understand them.
Luckily, there may be little need for you to delve deeper into these investments. If it’s platinum you’re hoping to invest in, bullion offers a variety of benefits you simply can’t get from an ETF. And since you can buy the metal in various sizes, not even price can interfere with a smart investment.
At Silver Gold Bull, we strive to offer the largest selection of precious metals you’ll find online. If you’ve considered platinum ETFs as an investment, we have plenty of alternatives that may work better for you. Visit our Platinum Bullion Products page today to see our impressive selection.
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