Investing in precious metals can be a great way to protect your money against economic uncertainties, helping it to grow for use in the future. A lot of time and effort can be put into considering what to buy, when to buy it and what the returns might be, but before you start, you also need to think about how you will finish.
When putting together any investment plan, you will also need to have an exit strategy so that you know what the end game will be in order to reach your goals.
Here, we will look at the importance of having a good exit strategy in place for your precious metal investments, as well as how to choose one, to make sure that you get the best outcomes for your money.
What is an exit strategy?
Your investment in precious metals will require you to think about what metals you want to put your money into and how much you want to spend, but you also need to consider what your goals are for the investment. You should consider whether you are doing this for short- or long-term gains, what you hope to achieve or what position you want to be in when you take your money back out.
Your exit strategy is your plan relating to when you want to liquidate your asset and how you want to do it, and this could depend on a few different criteria including your age, the value of your investments or having reached the point in life where you knew you would need it, such as retirement or your children going to college.
Having this plan in place at the start helps you to know where you are going and can then help to inform you of the decisions you make when starting your investment in the first place.
Selling your precious metals
When you do decide to sell your precious metals, it is important to do this carefully. You should make sure that this is always done through reputable dealers who understand what they are buying and will offer you a fair price and a transparent transaction. Make sure that you have done your own homework before you begin in order to understand whether you are being offered a good deal or not, and shop around for a few different quotes to compare prices.
You also need to take into account that there may be some additional costs involved in selling your precious metals, as there may be fees or transportation costs to take into consideration, so keep an eye on these to make sure that selling is still worth your while.
Your sale will go through much more quickly and easily if you have all your documentation in place. This should include purchase receipts, certificates of authenticity and quality guarantees as this will help to give credibility to your sale and avoid any hold ups.
What was the purpose of your investment?
When you chose to invest in precious metals, you probably had a reason for doing so. It might have been to fund your retirement, put the kids through college or to cut down on your working hours. This purpose will be one of the biggest factors in your exit strategy, as it will help you to determine when to sell. If you have reached the time in life when you knew that you would need your investment, then you now know that it is time to look around for the best price.
Alternatively, you might have wanted to simply make a comfortable lump sum to put towards your house or a round the world cruise, and have been waiting for prices to reach a certain level. Once this number has been reached, you know that the time is right to sell and enjoy your cash in the way that you had planned.
Do you have a timeframe?
When you put your money into a precious metals investment, it is important to know how long it will be until you get it back again. Think carefully about whether you are looking to make money overnight or in the next 20 years, as this will greatly affect how and where you invest it.
If you have paid a premium for a metal, can you realistically expect it to rise far beyond this in the short term? If you plan to hold on to your investment for a long term, are you prepared for the fact that it may not have reached the value that you hoped for when you get there?
Are you monitoring the market?
It can be easy to take your eye off the ball, particularly if you have invested over a longer period of time, but it is still important to monitor the conditions of the market to avoid any nasty surprises. If you can see changes in prices, you might decide to get out earlier than planned or hold on for a little longer, but without this knowledge, you cannot make informed decisions.
Do you have a contingency plan?
Any investment can go up and down in value, and even the very best plans don’t always work out the way that you expect them to and so having a contingency plan can be useful. If some of your criteria have not been met when you thought they would, will you continue with your exit strategy or do you have another plan?
Do you need the money whatever it is worth at this point? What percentage of your investment portfolio does this represent? All of these can help you to weigh up your options and decide whether there is another route that you can take.
It is always important to have an exit strategy for your investment, particularly as precious metal investments are made over a long term and are less about spot prices and sudden changes. Knowing where you want to end up can play a big part in how you start the journey.