Investors have many different motivations and objectives when considering an investment in precious metals. Precious metals:
- Are tangible/real assets – their value is not determined by any government or company
- Can provide portfolio diversification – adding precious metals to a stock and bond portfolio may increase overall return and reduce volatility and risk1
- May serve as a hedge against inflation in times of economic uncertainty
- May provide a store of long-term value as they are believed to have intrinsic worth
- May provide a safe haven in times of political or international unrest
As tangible commodities, precious metals may offer distinct advantages over stocks and bonds. While the value of stocks can decline absolutely, precious metals such as gold, silver, palladium and platinum usually retain some value, regardless of market conditions. Even when compared to other hard assets, such as real estate or fine works of art, precious metals compare favorably based on their high degree of liquidity and portability.
Bullion — defined as any precious metal coin or bar valued according to its metal content, purity and weight — is considered to be the most cost-effective way to invest in physical metals. It is relatively liquid and tangible, and you can purchase them in small quantities, which allows you to build a position over time.
Like any investment, it is impossible to consistently predict precious metal price movements. We suggest you work with your Morgan Stanley Smith Barney Financial Advisor to develop a plan to incorporate precious metals as part of a long-term investment strategy. Precious metal coins and bars come in a variety of sizes and forms, allowing you to build your portfolio as quickly or slowly as you wish. Standard denominations for retail bullion bars range from less than 1 oz. to 100 oz.
An allocation to precious metals would depend on your individual goals, objectives and circumstances. Precious metals may be suitable for investors who have capital appreciation as an investment objective or who may need to add a growth component to an income oriented portfolio. Investors should consult their Financial Advisor to determine a suitable allocation.
Yes. According to Internal Revenue Service regulations, individual retirement accounts (IRA) are permitted to invest in American Eagle gold, silver and platinum coins, as well as bullion bars. Due to Morgan Stanley Smith Barney custodial limitations, however, we do not allow bullion bars to be held in an IRA.
Physical precious metals are non-regulated products. Precious metals are speculative investments, which may experience short-term and long-term price volatility. The value of precious metals investments may fluctuate and may appreciate or decline, depending on market conditions. If sold in a declining market, the price you receive may be less than your original investment. Unlike bonds and stocks, precious metals do not make interest or dividend payments. Therefore, precious metals may not be suitable for investors who require current income. Precious metals are commodities that should be safely stored, which may impose additional costs on the investor. The Securities Investor Protection Corporation (“SIPC”) provides certain protection for customers’ cash and securities in the event of a brokerage firm’s bankruptcy, other financial difficulties, or if customers’ assets are missing. SIPC insurance does not apply to precious metals or other commodities.
1 "The Art of Asset Allocation, Second Edition," by David M. Darst, McGraw-Hill, 2008. Diversification does not guarantee a profit or protect against a loss in a declining financial market.