by Sharon Cullars

Created on: May 28, 2008

Before the advent of paper currency, precious metals served as a viable medium of market exchange. Easily stored and transferable, divisible and hard to counterfeit, metals like gold, silver and copper eventually became legal tender, replacing the mostly agricultural bartering system, whose goods were often seasonal and quickly perishable. As early as the fourth millennium BC, Egyptians used gold bars as an exchange medium and the first gold coins were introduced in Lydia around 650 BC. Centuries later, metal currency would stabilize the commodity market, providing the foundation of the present coinage system.

Precious metals are as stable as ever, and their current rising value ensures good investments in a volatile economy, especially during times of war and uncertainty. So how do you go about investing in metals? Well, there are five ways to invest in gold and other metals: tangible coins and bars; certificates; precious metals mutual funds; stock in mining companies; and gold and metals futures. For those who want to pursue precious metals mutual funds, here are things to consider:

1. First research those metals that are doing particularly well as well as the latest mining
techniques; check into associations like the Society for Mining, Metallurgy and
Exploration.
2. Decide how much you want to invest, whether you want to shift some of your current
holdings or invest straight cash.
3. Look at the prospectus for each fund, noting past gains and losses.
4. After taking these steps, simply contact a broker experienced in precious metals mutual
funds.

One caveat for investing in precious metal mutual funds: find funds that diversify across represented industries to offset any fund volatility. These types of funds are subject to industry risks such as the mining of the land and the market price of the metal itself. For example, if the market for gold rises, of course, the whole industry sees a surge in stock prices.

Indicators such as Morningstar, Inc., a mutual fund rating service, keep you apprised on fluctuations and top performing funds. Over the past three years, certain gold mutual funds have performed very well, including Midas (MIDSX) at 37.32%; Vanguard Precious Metals and Mining (VGPMX) at 36.57% and USAA Precious Metals and Minerals (USAGX) at 32.65%.

Although gold investments dominate (most precious metal funds are simply termed "gold funds"), there are at least thirty mutual funds that invest in both gold and silver. Again, the Vanguard Fund is a high performer when it comes to gold or silver. The fund has holdings in Impala Platinum (IMPUY), Anglo Platinum (AGPPY), and Aber Diamond Corporation (ABZ). Although all are foreign stocks, they can be purchased by U.S. investors through ADRs (American Depositary Receipts). The MIDAS Fund, also included in the Morningstar mutual funds has 65% of its assets in companies directly or indirectly involved with mining, processing and distributing as well as in gold, silver and platinum bullion.

If you do decide to invest in precious metal mutual funds, search for a broker who can assess the merits and attendant risks of investing in bullions and equities, who is versed in the basic research of metal market fluctuations and who will monitor your portfolio closely.

To keep informed about the precious metals market, read sites like GoldfingerCoin.com, which can give you a barometer of where metals currently stand in the market.

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