Should I Invest in Precious Metals or the Stock Market?

It’s been a wild ride in the world of investing over the past year or so. GameStop and AMC traded, and continue to trade, far beyond their fundamentals around the same time retail silver investors conducted a “raid” on the market. While these were certainly major news stories, many people still have big questions about investing.

One of the most common inquiries we get relates to whether people should invest in precious metals or the stock market. After all, this can have a major impact on your financial future. It’s possible to make an argument for both approaches, but your financial goals will dictate where you put your money.

Still, understanding both asset types can help you make a more informed decision. No one could’ve predicted what we saw in the investment world in recent months, so using recent happenings to make investment choices could prove useless.

By considering these events along with fundamentals, though, choosing whether to invest in precious metals or the stock market becomes an easier choice.

Big Moves in the Stock Market

There are many complexities to consider when looking at both the precious metals markets and the stock market. Something that many people fail to consider, though, is current trends and why they’re happening. Understanding why these occur is an important part to making investment decisions.

For instance, why did millions of first-time traders suddenly enter the stock market in 2020? One major contributor was the 13 million users who downloaded the RobinHood app. People who got stuck at home without sports events or new movies suddenly found themselves able to bet on stocks.

Add in the “meme stocks” fiasco, and it becomes apparent why so much interest currently centers on the stock market. A group that MarketWatch called “a loud corner of Reddit where millennials look to get rich or die tryin’” in 2016 suddenly had people clamoring for “stonks.”

Of course, the stock market isn’t the only place where big moves are taking place.

Investing in Precious Metals Gets Hot

People have recognized the value of precious metals since prehistoric times. Investing in them is nothing new, and many Americans who don’t own any stocks have either silver, gold, palladium or platinum stockpiles. Recently, though, excitement for investing in precious metals has increased even more.

A portion of this increase is attributable to the worldwide pandemic. People saw an economy going to shambles and wanted to hedge against potential recession. Of course, retail traders on Reddit also played a part in some cases. There’s even a custom WallStreetSilver bullion bar celebrating the group.

There are obviously some pretty big similarities to the rise in interest among the stock market and precious metals. The pandemic combined with retail traders really changed everything. Of course, this still leaves many asking whether they should invest in precious metals or the stock market.

To answer that, let’s look at some pros and cons.

Pros and Cons of Investing in Precious Metals

Even ignoring the current interest in the precious metals markets, there are still plenty of benefits of investing in gold, silver and other precious metals. In fact, civilizations have recognized many of these advantages for millennia. Nothing in life is always perfect, though, so we’ve included a few disadvantages as well.

Pros of Investing in Precious Metals

• Inflation hedge: Precious metal values often rise as the value of the dollar decreases.
• Store of value: Thousands of years of recognized worth isn’t easy to come by. This means few things store value as amazingly as precious metals.
• Tangible asset: Gold and silver aren’t companies that can “go under.” They’re tangible assets you can hold in your physical possession.
• Transferability and liquidity: Precious metals are highly liquid (i.e. easy to exchange for cash) and can easily be transferred from person to person.
• The demand is always there: If you took a gold nugget 2,000 years into the past or 2,000 years into the future, a demand will exist for the item.
• Universal value: Unlike currencies, precious metals typically hold a universal value.

Cons of Investing in Precious Metals

• Premium costs: You can’t typically buy precious metals at spot price. There are costs involved in selling these items, so you’ll pay a premium pretty much everywhere.
• Potential loss: You can’t misplace a share of a company. If you’re not careful, though, you could lose physical assets. Precious metal storage facilities can help avoid this.
• “Paper” metals: As many people learned during the Silver Raid Day in February 2021, the value of “paper” precious metals (e.g. gold and silver ETFs) doesn’t always go the way you’d think. At times, it doesn’t even track the underlying asset.

Pros and Cons of Investing in the Stock Market

The advantages of investing in precious metals clearly outweigh the disadvantages. Of course, this doesn’t completely answer whether you should invest in precious metals or the stock market. The benefits and drawbacks of the latter will make the answer clearer.

Pros of Investing in Stock Market

• Potential for dividends: Many stocks make periodic payments – known as dividends – to their shareholders. These aren’t guaranteed to last, but they’re an excellent incentive.
• Tax benefits: If you lose big on an investment, it can counteract some of the capital gains taxes you’d pay on stocks that earned money.
• High liquidity: Like precious metals, stocks typically have high liquidity. This is particularly true during normal trading hours.

Cons of Investing in Stock Market

• Potential to lose it all: If a company you invest in does miserably, you could legitimately lose your entire investment. This can’t happen with precious metals.
• Lost gains: The tax benefits of a capital loss are beneficial, but they also mean you lost out. Lower taxes really don’t seem as positive as earning more money.
• Research time: You can buy precious metals and know they’ll always have worth. Doing this with stocks means extensive research – and even that may not be enough.
• Lack of control: Remember when RobinHood blocked GameStop trades, or have you ever heard of trading getting halted? Big players in the stock market can affect how you are allowed to invest.

What’s the Takeaway?

If there’s one thing to remember when choosing to invest in precious metals or the stock market, it’s that there are no guarantees of profit. This is how it works with literally any investment. Of course, we at least know that gold, silver and other metals will always have some worth.

Does this mean you shouldn’t invest in the stock market at all? Again, this is a complex question. The following section will help you better understand.

What’s the Deal With Diversification?

One look at precious metal price charts shows that these assets can serve as a hedge against economic downturn. But when you look at the nuts and bolts of it all, this is nothing more than diversification. Gold and silver are simply a different investment than having cash in the bank.

Diversification is how experts around the world say people should invest their money. You don’t want all your eggs in one basket, so spreading your capital across multiple assets is ideal. If you invest in oil companies and they tank, for instance, shares in a hydrogen battery firm can steady your portfolio.

Just think of all the things you could invest in:

• Stocks.
• Bonds.
• Precious metals.
• Movie collectibles.
• Agricultural commodities.
• Real estate.
• Savings accounts.

Of course, the big issue with some of these is a low rate of return. Bonds and savings accounts are safe, but their returns are minimal. Precious metals and stocks, however, offer the chance for big payoffs. This is particularly the case with a potential silver shortage on the horizon.

Unfortunately, experts expect inflation rates to double their 2020 levels by 2023. Usually when inflation rises, stocks become more volatile. This is yet another reason people view precious metals as a hedge against financial turmoil. When done right, though, the stock market can prove profitable.

Stop Losing Money Today

Choosing between investing in precious metals or the stock market really isn’t an either-or decision. In fact, many people actually look at their options and decide to invest in nothing. This isn’t a surprising outcome considering what happened to many investments during the Great Recession.

Unfortunately, choosing not to invest is like investing in a failing asset. Inflation makes every dollar you own worth less every day, so if you have money just sitting around, it’s dropping in value even as you read this guide. You should always strive to make smart investment decisions, and not investing doesn’t qualify.

The best answer for “should I invest in the stock market or precious metals?” is neither simple nor complex. The answer is “probably a little of both.” Make sure you do plenty of research before choosing a stock to purchase, and check out our offerings at Silver Gold Bull today for great physical investments.