Savvy investors know how important it is to maintain a diverse portfolio. DIversification makes it easier to weather tough financial markets and reduces the volatility associated with inevitable spikes and drops. In traditional terms, diversification meant investing in different domestic and international stocks, corporate bonds, and government bonds, but these days, more investors than ever have been buying precious metals as well.
What Is a Diversified Portfolio?
Diversifying a portfolio requires purchasing a variety of assets that have uncorrelated prices. Economists believe that a diverse portfolio can help to minimize risk exposure while simultaneously maximizing returns. Though there is no way to eliminate the risks associated with investing, diversification offers a means of reducing the volatility associated with assets’ price movements.
Why Invest in Precious Metals?
Gold, silver, and other precious metals have long been coveted for their intrinsic beauty and value. Today, investors usually buy precious metals as a means of diversifying their portfolios and hedging against inflation. Gold, silver, and even platinum and palladium all offer unique opportunities, but all of them are great for reducing the risks associated with systemic financial concerns, inflation, and even political crises.
How to Diversify Precious Metal Holdings
Developing a good strategy for diversifying investments doesn’t just require buying and holding some gold or silver. It’s equally wise for investors to diversify their precious metal holdings to keep their portfolios well-balanced.
There are two ways to view diversifying precious metal holdings. The first is to split holdings between gold, silver, and other precious metals. The second is to purchase different types of metals, such as both investment-grade coins, the value of which is driven by supply and demand, and bullion, which follows spot prices.
Most reputable gold dealers sell a variety of products, including different types of metals formed into bars, government-minted coins, and rounds. No matter how precious metals are formed and what type of market drives their price volatility, they are valued based on metal content and weight.
Why Buy Investment-Grade Coins?
Since the value of investment-grade coins isn’t driven by the spot prices of the precious metals they contain, they make a fantastic investment in a diversified portfolio. Maintaining a stock of investment-grade gold coins helps to offset commodity and equity market volatility. It’s also ideal for investors who want an alternative to more highly regulated asset classes, which can experience severe volatility as a result of local or international political instability.
Other Types of Metals to Buy
Gold is by far the most popular precious metal, and it’s great for investors. It’s easy to buy and sell, even in challenging markets, and has a reputation for being a high-value investment. Every precious metals portfolio should include some amount of gold, but it’s also wise to consider a few alternatives.
Silver is easier than gold to acquire on a budget since it’s the least expensive precious metal around. Despite the relatively low price, it’s still easy to find demand for silver should an investor need to liquefy his or her assets. It has a number of industrial uses in addition to its better-known role in fine jewelry production.
Platinum is quite rare. It’s also quite useful, which makes it a good investment. While few people would recommend buying up a lot of platinum instead of gold or silver, it’s a good investment for anyone who has already secured silver and gold holdings.
Palladium is perhaps the least-known of the precious metals, but that’s changing. Over the past few years, it has been rising to prominence in precious metals markets. Palladium shows some promise when it comes to high returns, and it already offers an excellent way to balance an investment portfolio.
Planning Asset Allocation
One of the most challenging things about diversifying an investment portfolio is planning asset allocation. Don’t try to tackle everything at once. Start by doing some research to ensure each purchase is not just well-informed but also well-timed.
Most investors start by purchasing and holding gold before diversifying the rest of their precious metal holdings. Some even recommend diversifying even further by purchasing precious metals futures or stocks. When in doubt, consult an expert.
Ready to Invest?
Anyone ready to invest in silver or gold should take the time to find a reputable dealer. Look for a precious metal dealer that carries different forms of silver and gold to meet diverse investment needs. Check out Alliance Gold and Silver Exchange in Fort Worth, Texas, online, or call (682) 316-4221 for help with buying or selling coins, bars, jewelry, and other goods today.