With the recent fluctuations in the stock market, many investors are turning to precious metals for more stability.
Crissy Clawson, the manager at Central Texas Gold Exchange in Killeen, said she has noticed an increase in the number of local residents looking to diversify their financial portfolio by investing in precious metals — especially the younger generations.
“Sales have been increasing, but I did notice a spike in the second week of March that has remained fairly consistent since,” Clawson said.
While she never previously tracked the demographics of her clients, Clawson said she noticed many people who came in were of retirement age. More recently, there are investors as young as in their 20s, she said, with the bulk of her customers between the ages of 20 and 50.
Peter Beronio, a certified financial planner with Beronio Wealth Planning Solutions in Killeen, said the increase in interest in precious metals by his clients has not been shocking.
“Precious metals, especially gold, get more attention and are desirable as a flight to safety when the stock market stays down for an extended period,” Beronio said.
Central Texas Gold Exchange, at 1113 E. Central Texas Expressway, deals in a variety of precious metals, but also purchases gold and silver bars, dental gold, grills, silver, sterling flatware, holloware, coins, broken jewelry and old class rings.
“In addition to gold, silver is very popular,” Clawson said. “It is less expensive, which can be viewed as less risky. Also, less rewarding.”
But Beronio reminds investors that many precious metals also have practical applications.
“Many precious metals are not the same as gold, in the traditional sense, as a reserve investment.” Beronio said. “There are many varied industrial uses for these as well.”
Diversification is an important part of investing, according to Clawson.
Many people turn to precious metals as a temporary safety net against increased risk in the stock market, but Clawson said she recommends that investors look into retaining the long-term stability of precious metals as a permanent part of their investment plan.
“I consider gold and silver a long-term investment,” Clawson said. “Buy it, store it somewhere safe, and add to your investment when you can.”
Although she is not a financial advisor, Clawson said she has heard several recommend precious metals make up about 10 percent of a financial portfolio.
“I usually recommend a little bit of everything from silver to gold to coins to bullion and even 90 percent silver also known as Constitutional Silver or the less attractive term ‘junk silver,’” Clawson said. “A good idea is to buy the metals in different weights from 1 gram of gold to 10 ounces of silver and heavier.”
Metals can have their place in an overall portfolio, Beronio said, but he cautioned against overindulging on any one asset or asset class.
“The returns in individual asset classes can be fantastic for short periods but lack luster for a longer term, more balanced investor,” Beronio said.
Financial advisors can help investors better understand the pros and cons of precious metal investments, Clawson said.
“Fighting inflation or some sort of long-term insurance policy against inflation would be a reason to own gold long term,”Beronio said. “However, most folks will pay much higher taxes on any gains realized, as precious metals are taxed at the collectable rate, which is significantly higher than the long-term capital gains rates, currently.”
The difference may not be as substantial for those in higher tax brackets, he said.
“I like that gold and silver are commodities — they are tangible,” Clawson said. “In addition, one can invest a little bit at a time — even 1 coin at a time.”
But like all investments, precious metals come with risks as well.
“Understanding those risks and mitigating or balancing those risks are a function of understanding your individual tolerance for risk,” Beronio said. “Your risk tolerance, combined with your time horizon, will help determine an appropriate range of allocating your assets among the available universe of investment options and asset classes.”
Clawson also warned investors to be cautious to avoid scams.
While video bloggers and online dealers will attempt to predict the increase in the spot price of each metal, Clawson said it is all speculation.
“Be cautious of counterfeit products, salespersons who promise huge returns, prices that seem too good to be true, sales calls and emails out of the blue,” Clawson said.
Not all funds and investments are equal, Beronio added.
“Always take the time to understand what you’re buying,” Beronio said. “Precious metals, ETFs and mutual funds may not actually own any actual bullion — they may own mining companies. Buying bullion and coins will also come with a price for storage unless you take delivery and store it yourself.”