Metals are deemed to be precious when they are rare and this causes them to have high economic values. Asides from their rarity, their economic value is down to other factors. These include their processing and their role as a way to store value.
Precious metals occur naturally and are less reactive. They are high luster, ductile and are often a great way to invest. They were used as a means of economic exchange to purchase goods and services in ancient times.
In more recent times however, they are seen as investment vehicles and as industrial commodities and are traded as such. Some of the most popular ones are gold, silver and platinum. Gold and silver are coinage metals that is, they are used as components in minting coins.
Precious metals have a variety of uses in jewelry making, electronics, medicine, building construction and so on. The demand for them is not only driven by their practical uses, it is also driven by their investment value. You may read further on them here.
Precious metals are called bullion when in bulk form. They are traded on the commodities market. Bullions can be made into coins in a process called minting or made into ingots. Bullions are often defined by their purity and mass.
Investing in Precious Metals
You can invest in valuable metals in different ways. A person can directly buy the physical metal as bullion or coins. They may also choose to buy shares of a traded fund or trade futures in precious metals instead of the physical commodity.
For people who may not be able to buy through these means, there is an alternative. Some companies offer registered members a way to trade precious metals in a network marketing manner. They provide members with these metals at a low rate as well as other products.
How Network Marketing Works
Network marketing which is also known as multi-level marketing is a marketing strategy for selling products and services. In this kind of marketing, the MLM Company’s revenue is derived from a workforce that is not salaried. The workforce markets and sells the company’s products and they earn income through a binary or pyramid-shaped commission system.
In network marketing, compensation is theoretically paid out to members from a couple of potential streams of revenue. These can be commissions from sales of products by the participants to retailers. It could also be from commissions made from wholesales purchases by distributors who were recruited and are below a participant.
The participants below an upper participant are referred to as downlines. MLM participants are meant to vend products to end-users or consumers through word of mouth and referrals.
In addition to this and importantly, they are expected to recruit new participants to join the distribution chain. By doing this, they also earn some commission. These recruits become downline distributors for participants who recruited them. You can learn more on how MLM’s operate here https://www.thebalancesmb.com/is-it-multilevel-marketing-or-a-pyramid-scheme-2947159.
Controversies and Comparison with Pyramid Schemes
According to a Federal Trade Commission’s report on MLM, most people who participate in it lose money. Members are encouraged to believe that they can earn huge sums and bonuses including incentives like cars and foreign trips. While some attain this, it is statistically impossible for everyone to do so.
Closely related to MLM are pyramid schemes. These are fraudulent, unsustainable business models that are disguised as network marketing. In a pyramid scheme, only a handful of top-level members earn any income. The lower-level participants may earn for a while but will eventually lose their money when the business packs up.
The top-level participants typically recruit new members who pay upfront fees. They assure new members with a promise to get higher returns on their investment in a short period. The fees paid by the newer members are used to pay old participants until the model is no longer sustainable.
Top-level members usually up and leave at this point having defrauded others and made a considerable amount of money. Because of these, both MLM and pyramid schemes have been rendered illegal in some countries. While pyramid schemes are illegal in a lot of countries, MLM is still mostly allowed but often strictly regulated.
How Do You Differentiate Between A Pyramid Scheme And A Legal MLM?
The major difference between network marketing and a pyramid scheme is that in a scheme, there is no real product sold. No service is rendered either. Money only exchanges hands and circulates in a large network of people without making any revenue or profit.
Although they may look similar, telling an MLM and a pyramid scheme apart is quite easy. Some key points to check are:
- Does the company have a tangible product that they sell?
- How long has the company been around? MLM companies can stay around for a long time but pyramid schemes often do not last up to 2 years. If it is a recent company, then that is a big red flag.
- Promoters often make outlandish claims about how much you can earn in a short time. Do not fall for this as it is false.
- If the only way to make money is by recruiting others, then it is illegal. You can make money from MLM by selling only products and not recruiting any members.
Companies like 7k Metals provide MLM programs that encourage people to invest in precious metals. Before joining any company’s MLM program, ensure you do your homework and research about the company. You can check out this 7k Metals review as a start. Check out their distributors and if they are making huge claims or using high-pressure tactics, it is wise to avoid them.
Also, consider the product the company sells. Understand what it will cost you and see if you can afford to risk your time and money. By doing all these, you can tell if it is a legitimate MLM or a fraudulent pyramid scheme.
You can join affiliate programs that promote precious metals as an alternative to MLM. In this way, you do not sell any products but work with dealers of precious metals by referring buyers. You earn a pre-defined commission in the process.
Conclusion
Precious metals are good investment options for diversifying your portfolio. There are various avenues to invest or get involved with them and one of these is through multi-level marketing. You should be careful when intending to join an MLM. Do your research and ensure they are not an illegal pyramid scheme that is out to dupe you of your money.
