Stack of Canadian coins
When you get into the world of investing, there’s one word you’re guaranteed to hear: diversification. This simple word is a guiding principle for many. Of course, there are plenty of assets to choose from. In many cases, though, people wonder whether diversifying with gold and silver is smart.
In this guide, we’ll discuss the importance of diversifying your investments with gold and silver. We’ll delve into which factors you should account for along with all your options. At Silver Gold Bull, we believe an informed investor makes better decisions.
Investing for the future is something that everyone should do. Unfortunately, far too many people get excited about individual investments and overlook others. A person who just read an article about a potential housing boom, for instance, might decide to put all their money into real estate.
While this could pay off, it could also cost an investor big bucks. For instance, back in 2008 when the housing market crashed, those who invested in real estate saw tremendous losses. People that diversified with gold and silver, though? They fared much better.
When the housing market imploded, the price of gold shot up. In fact, 2009 saw the metal increase in value nearly 13%. This jumped to 27.4% in 2010 and 32.8% in 2011. That’s why diversification is so important: it protects your financial wellbeing even if other investments falter.
There are several other benefits to diversifying with silver and gold:
Diversifying with gold and silver is a great option for anyone who has focused too much on a single asset. When bonds and certificates of deposit (CDs) have lower returns, precious metals become much more attractive investments. The same is true during economic downturns.
The entire point of diversification is to ensure you don’t overexpose your investment to any single asset. If the housing market collapses, you don’t want real estate to be the only investment in your portfolio. The same is true if precious metals’ prices drop or there’s some other type of market fluctuation.
Of course, the precious metals market isn’t a singular entity. A situation where gold exceeds profit expectations, for instance, will not necessarily result in the same for the price of silver. This is why you should also consider diversifying your precious metal holdings.
So, is gold or silver the right investment? For diversifying with gold and silver, the operative word is “and.”
Silver earned the nickname “poor man’s gold” since it often fluctuates alongside the yellow metal, but this isn’t always the case.
In fact, it’s becoming an increasingly serious issue. The gold-to-silver ratio, for instance, climbed to 80:1 just a few years back. This means gold saw growth that — even if the value of silver increased — the white metal couldn’t keep up with.
Of course, this doesn’t mean silver is a poor investment. There have been many periods where silver outperformed gold. In fact, this has occurred countless times throughout history. This means you should consider investing in more than just one precious metal.
But when doing so, also take time to consider the type of precious metal you’re investing in. The following are just a few options:
Just like when you’re diversifying with gold and silver, investing in multiple precious metal types can protect your portfolio. Imagine a situation where an economic boom causes gold to decrease in value. In moments like that, silver might jump due to increased industrial needs.
When someone decides to diversify with gold and silver, they have a variety of investments to choose from. People have excitedly purchased physical bullion over the years, but there are also “paper” options available. Exchange-traded funds (ETFs) and mining stocks fall into this category.
These investment vehicles allow people to put their money into precious metals without owning physical bullion. In theory, these paper assets should track the price of their underlying metal. Unfortunately, this isn’t always how it happens.
If you choose to invest in paper gold, silver ETFs or other non-bullion options, just remember that you’re not actually buying precious metals. This nullifies many of the benefits that caused people to even consider diversifying with gold and silver.
Even after someone has a good grasp on diversifying with gold and silver, a few questions still occasionally pop up. Once you know the answers to these issues, it’s easier to make a smart investment decision.
The age-old question of precious metals is whether gold or silver is a better investment. Both have proven to be stores of value, and each has seen significant returns during economic crises. If you were to choose one, though, which would it be?
This really depends on your investment strategy. While many people expect the demand of silver to increase, it has traditionally proven more volatile than gold. This can result in quick profits, but it may not perform as well as its counterpart over long periods.
It’s also important to consider the fact that silver is an industrial metal. This means it can perform well even in robust economies. When diversifying with gold and silver, the best move is anyone’s guess. Fortunately, both have excelled as investments in recent years.
Gold and silver might get all the attention, but have you ever considered buying palladium bullion? Most of this silvery white metal goes to the automotive industry. Fortunately for those who own palladium, the industry has created enormous demand.
That’s why recent times have seen palladium reach higher values than gold. While it may not glitter like gold, this precious metal could still be a substantial investment.
Platinum is another investment opportunity that people often overlook. In the not too distant past, though, this precious metal was more valuable than gold. In fact, it stayed that way for a very long time. If you’re considering buying platinum bullion, this is another investment that shows promise.
When you diversify with gold and silver, it’s natural to wonder how much you should spend. After all, you can meet the definition of diversification whether precious metals make up 5% or 75% of your assets. There is no set rule, but experts have a few opinions.
Some financial gurus recommend making precious metals as much as 25% of your portfolio. This is a personal decision for each person — but, for the experts, diversifying with gold and silver is obviously important.
Whether someone puts most of their money in real estate, stocks, precious metals or bonds, diversification is an absolute necessity. The price of any investment will fluctuate as time passes. By diversifying your portfolio, you’re defending against any potential drop in value of a single asset.
The great thing about investing in gold and silver is that both have proven themselves throughout history. Even if other investments temporarily outperform precious metals, bullion still holds value. This is why so many use it to hedge against economic downturns.
If you’re ready to diversify with gold and silver today, visit our Precious Metals Bullion page for more information. Once you see our wide selection of offerings, you’ll realize that we have something for every investment goal.
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