Precious Metals vs Real Estate

Precious Metals vs Real Estate

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One of the best ways to build wealth over time is with investments, and since there are a lot of options out there, it’s hard to choose what to get started with. Nowadays, investors are considering more alternative investments such as precious metals and real estate, which are great options for investors that want to protect their wealth from inflation and diversify their portfolios.

Precious metals include gold, silver, platinum and palladium, and these are tangible assets that act as a hedge against inflation. On the other hand, real estate offers the potential for passive income and capital appreciation. Both assets come with their pros and cons, and it’s important to consider these when choosing what to invest in.

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Overview of Precious Metals and Real Estate

Precious metals and real estate are two different investment options that one can consider. Precious metals are popular among investors because it is a safe haven asset and a store of value. Whenever there is an economic downturn, precious metal is able to protect your wealth by retaining or sometimes increasing their value. They provide you with long-term value and will diversify your portfolio since most people invest in stocks and bonds.

Real estate is known for helping investors generate passive income. Whether it’s land, apartments or houses, investors can purchase these and hold on to them for a long time, collecting rent and taking care of the maintenance. The investor can also sell the real estate when the value has gone up. Real estate investments produce a steady cash flow.

Precious Metals vs Real Estate

Investing in Precious Metals

Precious metals are alternative investments that offer a reasonable rate of return and a store of value for wealth in the long term. They are mostly stable during times of inflation and protect your wealth from general economic uncertainty. Before investing in these, you should keep the time horizon, risk tolerance and financial goals in mind.

You can compare the different kinds of precious metals if you decide to invest in this asset. The four main assets that you can choose from include:

  • Gold: Gold is the most well-known precious metal that has served as a means to diversify your investments historically. Its value does not deteriorate but rather grows over time.
  • Silver: This is the most popular after gold and holds its value over time. It is often used for coins, bars and jewelry, like gold, but has a lower supply.
  • Platinum: This is a relatively new investment and a very rare precious metal with high demand across several industries. But platinum is highly volatile and offers sharp swings in its prices.
  • Palladium: Another option is palladium which allows you to diversify your portfolio and is more volatile than gold or silver. It is mostly used in the automobile industry.

Why Precious Metals Are a Great Investment

When considering your investments in precious metals, it’s a good idea to consider to advantages and disadvantages. Adding precious metals to your portfolio will reduce the risk of concentrating your investments on a single asset.

Pros

  • Precious metals act as a store of value and will grow over time.
  • They are finite resources, so their value will remain high.
  • They are tangible assets, so you can see and hold your investment.
  • Precious metals offer tax advantages, especially in an IRA.
  • Remains stable during a market downturn.
  • There is very limited counterparty risk.
  • There are multiple ways to invest in precious metals.

Cons

  • You need to pay insurance and storage costs when managing it.
  • Selling gold comes with capital gains tax.
  • It does not deliver high returns.
  • It is volatile in the short term.

Ways to Invest in Precious Metals

There are different ways to invest in precious metals, and this makes it a versatile asset that you can work with. It’s important to check the ways to invest in this asset and choose the one that works best for you.

Bullions

One of the best options is to invest in physical precious metals, which are bullions. Bullion is a form of bars and coins that are made from precious metals and are usually sold in ounces, kilograms and grams. If you want to buy bullion, you should first check the current market value and the spot price of the precious metal and compare it to the future and previous prices.

After this, you should check where you want to purchase your bullion. Look out for reputable dealers or purchase them online. It’s important to look through customer reviews and do your research before working with a dealer. Another thing you should do is determine how much you want to invest and learn about the taxes you will pay, like the capital gains tax.

Gold and Silver ETFs 

Another way to invest in precious metals is with gold and silver ETFs. Exchange Traded Funds are investment funds that hold different kinds of assets. When you invest in an ETF, you are exposed to the price movements of these precious metals, and you don’t have to own the metal physically. You can trade ETFs on stock exchanges and buy and sell them like stocks.

Gold and silver ETFs are a top choice for investors that want to quickly and easily invest in these metals. Aside from allowing you to invest in precious metals, ETFs usually consist of multiple assets, which allows for even more diversification. If you decide to invest in ETFs, you should consider the fees and expenses, track performance record and liquidity of the asset.

Mining Stocks 

You can also decide to invest in mining stocks. This involves investing in the share of ownership of a company that extracts and sells precious metals. When you purchase mining stocks, you are given ownership of their physical precious metal reserves. But, your investment will either be good or bad depending on the performance of the company.

One of the benefits of investing in mining stocks is the fact that it offers exposure to precious metals without having to own them physically. Also, they provide dividends that offer additional income. But, the price of the underlying metal fluctuates widely, which is the main downside.

Precious Metal IRA

If you’re wondering how to prepare for retirement, a precious metal IRA is the ideal choice. This is a self-directed investment retirement account that allows you to invest in gold, silver, platinum and palladium. With this account, you can hold the physical metals in your IRA. With a precious metal IRA, you need to first decide which one you want to invest in.

The precious metal you choose depends on your preferences. If you want a safe haven asset, you can go for gold, but for significant returns, consider investing in silver. Once you’ve decided on the precious metal that you want to invest in, you should select an IRA custodian to work with. This is a company that helps you set up and manage your precious metal IRA.

Finally, you should purchase the physical precious metals either through a third party or with the custodian. Before buying a physical metal, you should check the minimum purity requirement by the IRS. Gold should have a purity of 99.5%, 99.9% for silver and 99.95% for platinum and palladium.

Precious Metals vs Real Estate

Best Companies to Get Started With

When investing in precious metals, you must work with a reputable company. There are different companies that you can work with when investing in gold and other metals or an IRA.

#1

Augusta Precious Metals is a great option for investing in physical precious metals or a gold IRA, but it has a high minimum investment of $50,000. The company focuses on educating its customers, and they give you a dedicated agent to help you with the whole process.

#2. Goldco

#2
95%
Trusted

A well-known option is Goldco, which is known for its affordable flat fees. The fees don’t change based on the asset you invest in; it is cheaper than most competitors. Goldco has mostly positive reviews online and offers the option to invest in gold IRAs.

The option with the lowest minimum investment threshold on our list is American Hartford Gold, and it also comes with low fees. With this company, you also get free storage and insurance for up to three years if you want to open or move your gold IRA. But they don’t offer platinum and palladium.

Precious Metals vs Real Estate

Investing in Real Estate

Real estate is widely known as a way to build wealth over time and offers financial stability. These investments increase in value over time and will protect you from inflation. It also provides consistent rental income. Different real estate investments include residential and commercial properties, land, and REITs. It’s essential to do your research before investing in real estate.

Regarding real estate investments, it’s essential to check factors like current and future population growth, property values, and job opportunities, as these indicate higher returns and value of the property. Furthermore, you should research the current market trends in real estate to determine what to invest in.

Why Real Estate Is a Great Investment

Real estate is generally known as a safe investment as it has a value that increases consistently, and there is minimum risk. There are also different benefits and options, but you must consider the downsides.

Pros

  • There are many options to invest in.
  • You can receive recurring cash flow and passive income with rental income.
  • You can receive tax breaks and deductions due to deductions.
  • It protects your investment from inflation.
  • You can deduct operating expenses relating to property taxes.
  • The value of homes appreciates regularly.

Cons

  • Real estate has low liquidity, so it cannot easily buy and sell.
  • It is only suitable for long-term investments.
  • Cash flow from rents is not assured.
  • Market timing for real estate investments is tricky.

Ways to Invest in Real Estate

If you’re considering investing in real estate, there are a few ways to go about it. Here are some of the methods to invest in real estate.

Purchase Real Estate Directly

The quickest way to invest in real estate is by buying your home or purchasing a rental property and becoming a landlord. You can buy a home or apartment and rent it out to others or live in it and wait for the value to increase.  

Invest in REITs

Another option is to buy Real Estate Investment Trusts, which allow you to invest in real estate without actually getting the physical real estate. These are similar to mutual funds; the REIT company will own commercial real estate with your investment. This trust pays out high dividends and gives you access to various real estate options.

Flip Properties 

You can consider purchasing an underpriced home, renovating it with a cheap budget, and reselling it for a profit. This is a popular way of investing in real estate; many home flippers look for the cheapest option. Selling the property quickly is important because the longer you hold it, the less income you get.

Factors to Consider When Choosing Between Precious Metals and Real Estate

Here are some factors you should consider when deciding between precious metals and real estate.

  • Protecting Wealth During Inflation: The success of your retirement depends on how you can diversify it, and doing it right allows you to protect your wealth during inflation. Precious metals are the best option to diversify your portfolio because it is highly unrelated to traditional assets. Real estate can protect you from the volatility of stock markets, but it depends on economic growth and can take a hit.
  • Returns and Profit: There is a difference between the returns you get from precious metals and real estate. Precious metals can be volatile in the short term but are stable in the long term and don’t offer high returns. Instead, it acts as a store of value. On the other hand, real estate is less volatile and offers predictable returns.
  • Tax Benefits: Precious metals are not usually subject to capital gains tax, and you can get other tax advantages when you use an IRA to invest. Real estate investments also offer tax benefits; you can take advantage of the exclusion of capital gains.

Conclusion

It’s important to consider your options between precious metals and real estate to make the right decision. Precious metals are tangible assets with long-term value and inflation protection, and buying or selling them is easy. As for real estate, this is more complicated and requires a higher level of commitment. They are less liquid but offer consistent returns. Consider your investment goals before choosing between precious metals and real estate.

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