Diversifying Your Portfolio with Gold
Financial experts recommended portfolio diversification for two reasons: Firstly, a diverse portfolio allows investors to minimize their losses should the prices of some of their assets go down. Secondly, it makes for an effective long-term financial performance. Physical commodities are usually used in the diversification of portfolios, with gold continuing to lead the way, as it performs independent of the stock market. When stocks go down, you could expect gold prices to increase. This is why experts recommend allocating some assets to gold bullion, coins, or ETFs.
Tips in gold diversification
1. The first thing investors need to understand when using gold to diversify their portfolios is that the precious yellow metal shouldn’t be treated like a normal stock. Gold should never be liquefied unless absolutely necessary, so only use money that you can afford to lose. Take cue from investors who sold gold in the past because they thought it was unprofitable compared to other assets. When a bearish market occurred, these individuals had very little options to look at.
2. Make sure not to invest more than 10% of your assets in gold. Gold is highly volatile and while it is beneficial in a weak market, it can turn on investors during a strong one. John Graves, a veteran on the precious metals market, believes in gold’s prowess to save assets during a weak economy. In an article posted on Bullion Vault, he explains how he believes gold should comprise 5-8% of a typical portfolio. “Nobody can predict the future,” he stated. “…and if there is a catastrophic event and the stock market dives, gold will go through the roof.” The US’ current market is still in bad shape and gold prices today are pretty impressive. To see today’s gold price, it may be beneficial to check Bullion Vault’s live chart.
3. The simplest way to diversify using the precious yellow metal is to either buy shares of an ETF fund that has gold or purchase physical gold. ETFs that have gold are popular right now since they own huge amounts of the precious metal that are stored in vaults around the globe.
Investors who are worried about the current economic status should invest in bullion or coins. ETFs may be popular but no one will ever know when financial systems will collapse. So, keeping actual gold assets in a bank or private vault is always a good strategy.