Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.
When it comes to investing in precious metals, gold and silver get the lion’s share of attention. However, investing in platinum is another option worth considering. Specifically, you can invest in stocks of platinum mining companies that work on the exploration, extraction and processing of the high-value precious metal. This type of investment may help diversify your portfolio, hedge against inflation and potentially earn you a profit, but there are things to consider first.
In this article, we'll explore everything you need to know about investing in platinum stocks, including the pros and cons, how to invest and how to build a strategy.
Table of contents
- Pros and cons of investing in platinum stocks
- Steps to invest in platinum stocks
- How to create a platinum stock investment strategy
- Platinum stocks to consider for investment
- Platinum stocks FAQs
- Summary of how to invest in platinum stocks
Pros and cons of investing in platinum stocks
- Platinum is a rare and valuable metal that is in high demand in a variety of industries.
- Platinum can be a good hedge against inflation, as its value tends to rise along with the rate of inflation.
- Stocks of platinum mining companies may help diversify your portfolio.
- Investing in platinum stocks offers convenience and liquidity compared to investing in physical platinum.
- The platinum market is relatively small, making it more susceptible to price swings than other precious metals.
- The price of platinum stocks is influenced by many factors, including the price of platinum, geopolitical risks and company performance.
- Platinum stocks are often tied to the automotive industry, which can be impacted by a variety of factors, such as consumer demand.
Platinum is a rarer precious metal than gold, with unique properties that make it highly sought after in various industrial applications. Like other precious metals, platinum is a safe-haven asset that can help protect your wealth against inflation.
However, at times, the precious metal can be more volatile than gold and silver because of its smaller supply. It’s estimated that there are 5 billion ounces of gold above the ground, 3 billion ounces of silver but only 200 million ounces of platinum, the bulk of which is produced by South Africa.
The price of platinum stocks can depend on a number of factors, including the spot price of the metal, the global economy, company financials and geopolitical tensions affecting platinum supply. For example, Russia — the world’s second largest producer of platinum — saw its exports drop by 10% in 2022 as a result of its war with Ukraine.
Investing in platinum stocks offers you exposure to platinum without needing to own the physical metal and deal with the storage and insurance that comes with metal ownership. Stocks can also provide more liquidity than platinum bullion.
Steps to invest in platinum stocks
Getting started with platinum stocks requires careful planning and informed decision-making.
1. Do your research: Before investing in any stock, it's important to research and understand the company you're investing in. Information about publicly traded companies, including their financial reports, is available online. Additionally, decide how much money you want to dedicate to platinum stocks. The amount will depend on your financial circumstances and goals, but be mindful that it’s essential to have a diversified portfolio to limit your risk.
2. Choose a brokerage: You'll need to open an account with an online trading platform, brokerage firm or trading app in order to buy platinum stocks. You can use a financial advisor if you prefer to have more help in the process.
3. Choose a platinum stock and buy it: Once you've chosen which company you want to invest in, you can buy the stocks through your brokerage firm or trading app, just like you would any other stock.
4. Monitor your investment: Be sure to monitor your investment to ensure it's performing well. Regularly review your portfolio as a whole and make adjustments as needed.
How to create a platinum stock investment strategy
Creating a successful platinum stock investment strategy requires a deep understanding of the market and its dynamics. Factors such as mining production, industrial demand and global economic conditions influence the price of platinum. By closely monitoring these supply and demand drivers, investors can make informed decisions that align with their investment goals and risk tolerance.
Below, we will explore key steps you can consider when formulating an investment strategy that aims to maximize potential returns while mitigating risks.
Stay informed of the market
To make informed investment decisions, investors must stay up-to-date on the latest news and market trends related to platinum stocks. This practice may help you adjust your investments by understanding when it’s a good opportunity to buy or sell.
Diversify your portfolio
Investing in a variety of assets can help mitigate risk and protect your investments against potential losses. Financial experts commonly suggest allocating no more than 5% to 10% of your portfolio to precious metals to avoid a concentration risk.
Consult a financial advisor
A financial advisor can help you assess your risk tolerance and develop a personalized investment strategy tailored to your needs and wants. They will also consider your broad financial goals to create a well-balanced and diversified approach. Plus, they can help you monitor your investments and optimize your strategy.
Maintain a wide perspective
When investing in platinum stocks, it's essential to maintain a broad perspective. Look beyond short-term market conditions and consider the long-term outlook for the platinum market. There’s no guarantee of how platinum will perform, but precious metals investing is typically viewed as a longer-term strategy.
Precious metal prices can often see short-term price volatility, but they generally appreciate over longer horizons. This is evidenced by platinum’s price going from $81.86 per troy ounce in 1972 to its all-time high of $2,185 per troy ounce in 2008.
While it's important to stay informed about the latest news, such as changes in supply and demand or new regulations, investors should also keep an eye on broader economic trends that may impact the price of platinum. For example, the growth of the electric vehicle market and increasing demand for fuel cells could boost demand for platinum in the long run.
Platinum stocks to consider for investment
There are dozens of publicly traded companies operating in the platinum and platinum group metals (PGM) mining space. However, two companies stand out among the rest: Anglo American Platinum Limited and Impala Platinum Holdings.
Anglo American Platinum, headquartered in South Africa, is the world's largest producer of platinum, accounting for 38% of the world’s annual supply. It’s also involved in PGM mining, refining and marketing. The company has a market capitalization of $158 billion and offers a generous dividend yield, which could make it appealing to income-seeking investors.
Founded in 1966, Impala Platinum Holdings is also based in South Africa, is a prominent PGM producer with mining, refining and recycling operations and also mines nickel, copper and cobalt. The company has a market capitalization of around $75 billion and pays a dividend with a yield even larger than Anglo American Platinum.
Platinum demand remains robust due to its critical role in various applications, including industries such as automotive (catalytic converters), electronics (semiconductors) and renewable energy technologies (wind turbine engines and solar cells). Before investing in any platinum stocks, assess your risk tolerance and financial goals and carefully evaluate the fundamentals of the companies you are interested in.
Platinum stocks FAQs
How do you know whether investing in platinum is the right choice?
Should you invest in other precious metals besides platinum?
Additionally, make sure to diversify your investment portfolio as a whole by investing no more than around 5% to 10% of your total portfolio in precious metals, as recommended by most financial advisors.
How do you know if it's a good time to invest in platinum stocks?
What is better, platinum or gold?
Is it safe to invest in platinum?
Summary of how to invest in platinum stocks
Platinum, a rare and valuable precious metal, is known for its industrial applications and potential as a hedge against inflation. One of the most accessible ways to invest in platinum is through mining company stocks, which offer exposure to the platinum market without physical ownership of the metal.
To start investing in platinum stocks, it’s essential to conduct thorough research beforehand. Investors must stay informed of market trends, supply and demand dynamics and the global economic conditions that influence platinum prices.
Building a successful investment strategy involves staying informed, diversifying your portfolio and consulting a financial advisor who can tailor a strategy to your specific goals and risk tolerance. Given the metal’s long-term growth, safe-haven status and the diversity it can bring to your portfolio, platinum stocks could be a good fit for your needs.