Segregated or Allocated Storage: Which is Best for You?
People who are worried and stressed by the volatility of the stock market, rising inflation, geopolitical turmoil and their effect on currencies turn to investments in precious metals like gold and silver as a safer bet, a store of value, and for wealth protection. However, deciding to invest in physical gold, silver, and other precious metals carry with it another challenge: how to store them safely and securely?
They not only take up space in one’s home or business and are heavy and uncomfortable to transport, but they also present security risks if other people learn that you have physical gold and silver stored in your home or office. This is why gold and silver or bullion vaults were built by companies that offer this service to investors. Their vaults contain the investors’ precious metals and these companies or depositories protect and insure these metals, with a nominal fee for maintenance and security.
These vaults offer either segregated or allocated storage. What is the difference between the two? Which is best for you? It depends on the type of investor you are and why you need the storage.
Segregated storage is a form of precious metal bullion storage that allows you to buy precious metals and store them in a vault separate from the precious metals stored by other people with the company or depository. You may have your own shelf or designated area where you can access your metals any time you need to. This means that you will receive the exact same bullion you put into the storage – the very same bars or coins you put into the vault.
This is for you if you are the type of investor who believes that specific pieces of metals will increase in value over time and you want to speculate on the different values of bars and coins, so you want to hold these metals separately in their respective vaults as a collector does. It can both be a hobby and an investment strategy.
This would mean, though, that it will cost you more for the different vaults you have for your precious metals, as well as the individual protection and services you enjoy for each of your metals.
Allocated storage is a form of precious metal bullion storage where your precious metals are pooled along with the holdings of other investors in one vault. This means that you will receive the exact same type and amount of bullion you put into the storage – if you put in 10 one-ounce American Gold Eagles, you will get 10 one-ounce American Gold Eagles back, but not the exact same coins you originally put in.
This is for you if you’re the type of investor who buys precious metals mainly as a hedge against economic slumps and longer-term declines. Your investment in precious metals is just a way for you to diversify your portfolio, so for you, all precious metals are the same. The metals play the same role as investments in real estate or in international investments if your main portfolio consists of investments in stocks and bonds. You don’t have the inclination, time, and energy for coin collecting and monitoring each metal’s fluctuating prices in the market, because you’re in it for the long term, so it makes no sense for you to store them in segregated storage.
This would mean that it will cost you less than segregated storage as you wouldn’t have to spend more money for a differentiation that you don’t need in the first place.
Which is best for you?
“Best” is always relative. It depends on the type of investor you are, why you need the storage in the first place, your own resources for paying for storage maintenance and security, and even your sense of personal space as it extends to your precious metals purchased. You need to consider each of these factors and how, when combined, best match with what segregated storage or allocated storage has to offer.