Many investors choose to diversify and store value through precious metal investments in their portfolio, but how much of that investment should come from precious metals?
Precious metals should make up at least five percent of any portfolio for maximum protection from market volatility, currency weakness, inflation and economic collapse.
What is Gold?
Gold has long been seen as a safe haven for wealth storage. It does not degrade, corrode or lose value with time – which explains why Kings and pirates coveted it, Central banks stockpile it and millions of investors own it today. Gold’s unique non-interest bearing nature also makes it a potency addition to any portfolio.
Gold is one of the safest assets to protect yourself against declining economies and inflation, often rising during times of economic strain due to demand for tangible safe haven investments like gold. Plus, unlike stocks or cryptos which experience much greater levels of volatility – gold provides effective diversification opportunities and its lasting significance is something other precious metals cannot match; platinum and silver tend to be used more industrially while as an asset class gold’s worth has always been recognized globally.
Why Should I Buy Silver?
Answering this question depends entirely upon a person’s circumstances and portfolio. As a general guideline, however, precious metals like gold and silver should be included as part of a well-diversified investment portfolio.
Diversifying your portfolio is crucial, as putting all of your money in one commodity could expose it to significant risk. Diversifying across multiple markets helps mitigate this risk while potentially making investments more lucrative.
Silver makes an excellent asset addition for any portfolio as it remains highly undervalued. Furthermore, its properties make it a natural hedge against economic instability and currency devaluation – for instance during 2008 financial crisis many governments took on unsustainable amounts of debt while flooding their economies with cheap money which resulted in inflationary trends in various asset classes such as stocks, bonds and real estate prices – something unlikely to continue going forward – silver offers an excellent hedge against these massive economic risks.
How Much Should I Buy?
Precious metals can provide your portfolio with added diversification and protect it from inflation, currency devaluation, political unrest and economic collapse. How much you invest will depend on your personal goals and risk tolerance.
To determine how much gold or silver you need, start by calculating how many ounces would cover your monthly expenses during a financial crisis. To do so, multiply your monthly expenses times the duration of that crisis.
Example: If your monthly expenses total $500 and the crisis lasts three years, 14 ounces of gold would be necessary.
As a general guideline, your goal should be to purchase enough precious metals investments to cover your monthly expenses in case of financial emergency. Since both gold and silver have a significant correlation to global economy, investing in both is recommended to diversify assets. A Morgan Stanley financial advisor can assist in developing an appropriate precious metals investment strategy tailored specifically to you.
Should I Buy Physical Gold or Silver?
Physical gold and silver investments may not be suitable for everyone. Bullion — pure gold formed into bars and ingots — provides direct exposure to metal prices but requires extensive space for storage. Furthermore, IRS classifies bullion as collectibles with higher tax rates than long-term capital gains.
Coin investors often turn to South African Krugerrands, British Sovereigns and Britannias, American Eagles and Australian Kangaroos as a reliable way to diversify their investments portfolio.
Many investors choose precious metals as an investment because they offer tangible stores of value outside the financial system and with no counterparty risk. Furthermore, precious metals have proven themselves effective forms of wealth preservation and financial insurance; although it’s impossible to predict when bear markets or economic disruptions may strike, investing in precious metals may help cushion any shock when other investments collapse.