Inflation involves a sustained increase in prices – it is maintained over a period of time – and generalized – it affects a significant number of goods and services. It is one of the most repeated words in recent years due to the high levels of inflation that have been recorded, unprecedented in recent decades. This increase in prices has consequences for everyone because it leads to a decrease in the purchasing power of money. One of the keys to dealing with it may be to invest in silver or precious metals.
That is, the increase in the general price level causes money to lose value, since, if prices increase a lot, tomorrow we will be able to buy fewer products than today with the same amount of money. Therefore, whenever there is inflation to keep money immovable – under the mattress as they usually say – it entails a loss and is a mistake for personal finances.
One way to combat inflation and avoid losing purchasing power is to invest money with the aim of achieving a return higher than the CPI. One of the investment alternatives are gold and silver. Both gold and silver are recurring assets in periods of inflation. They register profits, “in part because the rise in the prices of goods and services often coincides with a weaker dollar,” they point out from Selfbank.
How to invest in gold and silver?
As with other investments, capital gains may be obtained from the evolution of the price of the financial product. Specifically, you can invest in gold and silver directly through bars and coins. For this modality, you must use certified entities with a guarantee of the weight and quality of the gold bar they offer.
This is the most traditional way of investing in gold. However, as highlighted by Raisin, it carries more risk “as it can be lost or even stolen”, since precious metals have a high value. In this case, it must be taken into account that this investment entails the acquisition of a physical product that must be stored and requires safe storage and the costs that this entails to be taken into account, since they will affect profitability.
But there are also other options to invest in gold or silver. It is possible to buy shares of companies close to these markets. In this case they would be companies dedicated to the mining of these precious metals. “Although it is not a direct investment in gold, the value of the shares will be strongly correlated and at the same time, what will happen in the gold extraction mines will also have a direct impact on its value,” explains Raisin.
This way, investors can also earn dividends. It is the part of the social benefit that is distributed among the shareholders and one of the main sources of profitability of the shares. However, on occasions, the general meeting may deem it appropriate not to distribute the dividend.
Additionally, you can use an exchange-traded fund (ETF). Specifically, it is a collective investment instrument, but it is traded and settled exactly like shares in the stock market. One of its great advantages is diversification. The CNMV states that it offers the possibility of participating in the evolution of the main markets, without the need to invest in each and every one of the values that make up the reference indices.
Another option is derivative products, financial instruments whose value derives from the evolution of the prices of another asset, called the “underlying asset”. Among derivative products, eToro explains that “a simple way to invest in the raw materials market is using contracts for difference -CFDs.” However, the CNMV, the financial regulator, warns of “the possible particularities and specific risks that may arise in each case.”
