How to Invest in Tangible Assets

by D. Laverne O'Neal

When economic conditions inspire little confidence, some investors pull money out of the usual stocks and bonds and put it into tangible assets. Tangible assets are also referred to as hard assets. Tangible assets you can physically see, and possibly touch, as opposed to intangibles, such as intellectual property or brand names. Gold and other precious metals, real estate and minerals are examples of tangible assets. Investing in these assets can take many forms.

1. Invest in gold or other precious metals. Gold often gains in popularity with investors when financial markets hit a patch of trouble. Gold is also traditionally considered to be a quality hedge against inflation, retaining its value even when the U.S. dollar loses buying power. You can invest in gold directly by buying bullion or coins from a dealer. You can also buy shares in mutual funds that invest in companies that mine gold. Exchange-traded funds (ETFs) are another possibility. Unlike mutual funds, ETFs trade on a stock exchange and reflect an index such as the S&P 500. Gold futures or options are high-risk and should remain the province of investors with experience and a deep knowledge of futures trading. Other metals such as silver and platinum can also be purchased directly or via funds.

2. Buy real estate. Of course, investing in a home of your own protects you from rent increases. In addition, the tax advantages of home ownership can act to reduce your actual yearly or monthly cost. Moreover, unless the value of your home drops, your net worth rises as you pay down the mortgage. Finally, once you own your home free and clear, you will have cash available to devote to other investments. You may even to decide to purchase additional real estate to rent. Finding tenants may require tenacity, but ideally, you'll set rents to cover the mortgage, insurance and taxes on the property. When the is mortgage paid, the rents become mostly profit for you. If you don't want to go it alone with rental property, consider a real estate investment group. Like a mutual fund, it allows you to invest in multiple properties. The group charges a fee for collectively managing the rentals. A real estate investment trust, or REIT, is an avenue into commercial real estate ownership. Like stocks, REITs are exchange traded and by law pay 90 percent of profits to investors as dividends.

3. Purchase minerals. The simplest way to invest in minerals, such as uranium, is to buy a mutual fund or ETF with holdings in companies that extract and/or process the material. You can also buy minerals futures and options via a broker, but these are risky investments at best.

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