How to Invest in Precious Metals Mutual Funds

Many investors turn to precious metals mutual funds when they consider the volatile economy, scandals within many corporate headquarters and general uncertainty in the market. Precious metals mutual funds allow you to invest in highly profitable commodities, with the benefit of professional management as well as a diversification among different mining and metals companies.

Instructions

Difficulty: Moderately Challenging

Things You’ll Need:

• Computer

1. Consider your current investment portfolio--will you shift a portion of your current holdings into a precious metals mutual fund, or invest with cash?
2. Decide how much you are willing to invest.
3. Decide how much risk you are willing to take on and the amount of time you want to spend in the precious metals mutual fund market. Funds will be optimized for different lengths of time (1 year, 3 years or 5 years). The amount of risk and expected returns generally diminish the longer you are involved in the market.
4. Research the precious metals mutual funds that are currently performing well. Past top performers have included the U.S. Global Gold Shares Fund as as well as Oppenheimer's Gold and Special Minerals Fund. Among the field's top performers, returns vary from approximately 25 percent to 55 percent.
5. Read about the latest mining technology--this technology drives the efficiency of the mining process. Consider subscribing to periodicals or online RSS feeds from associations such as the National Mining Association or the Society for Mining, Metallurgy and Exploration.
6. Choose three precious metals mutual funds that look the best to you based on your research.
7. Request the prospectus for each fund.
8. Read each prospectus carefully and make comparisons between past gains and losses, as well as expected gains and losses.
9. Check the Morningstar risk rating for each prospective fund.
10. Invest in the precious metals mutual fund of your choice through your broker.

Tips & Warnings

• Aim to begin with no more than 10 percent of your portfolio in precious metals mutual funds.
• Consult with your investment advisor before investing.
• Precious metals mutual funds can be extremely volatile. If this is your first mutual fund investment, you might consider a fund that offers more diversification of represented industries.
• Be aware of the differences between precious metals mutual funds, exchange-traded funds and investment in actual precious metals.