The combination of an improving global automobile industry and supply shortages is painting an optimistic picture for palladium and platinum as we move ahead, and funds like PALL and PPLT may prove attractive in the coming weeks and months. However, it is important to note that these two components of the precious metals industry tends to behave a volatile manner.

Therefore, while it may be tempting to dive headfirst into either of these funds, both are best approached conservatively. By using PALL or PPLT in combination with a gold-based product like iShares Gold Trust ( IAU), investors can construct a well-diversified precious metal portfolio.

Written by Don Dion in Williamstown, Mass.


At the time of publication, Dion Money Management owned iShares Gold Trust.

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