Top 7 Reasons Why Precious Metals Are a Great Way to Diversify Your Portfolio

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People are greedy, and when one of their stocks blows up, they instantly regret not selling all they own and putting it into this asset. After all, that’s what they think they would have done had they known, but they didn’t know. You never know until it’s too late. This stock could have taken a different turn just as easily. This is why you never put all the eggs in one basket. Now, regarding diversification, you need to start considering precious metals.

Low correlation with stocks and fiat

The point of diversification is to preserve and grow your wealth while acknowledging that the conditions will change.

The problem with buying just stocks is that it’s usually not just one stock going down. When something big happens on the market, all the stocks will lose value (save a few). This is why diversifying by buying different stocks is a good idea during periods of prolonged stability. However, this is not the best action if you expect things to go south.

Having your assets in different asset types, especially those with low correlation, ensures that even if the value of one asset goes down, the value of other assets remains the same or goes up. This way, the negative market trends will be countered.

Since this is a financial decision you’re making for security, remember that investing in a gold or silver IRA (individual retirement account) might be a great way to secure it. It also helps create a hedge against inflation.

Human psychology in crisis

In moments of crisis, the assets humans love the most are those they can put in their backpacks. Since the correlation with stocks is so low, the values of these asset types move in opposite directions.

This means that when people’s trust in abstract values (like institutions, etc.) starts decreasing, their trust in commodities like food, fuel, and precious metals increases.

Sure, no one expects things to go so bad that you must put the gold coins/bars in your bag and carry them around in a backpack. Also, if the market collapses, having the bars in your safe will not improve things; however, something is reassuring behind the ability to own the assets in question physically.

High liquidity

You can both buy and sell silver and gold at a moment’s notice.

Just make sure that you have all the documentation on hand. You’ll get proof of ownership when buying gold and must keep all this paperwork. Even things like legal document comparison can be useful in improving your gold buying strategy. After all, different regions have different laws, and while gold and silver are universally used across the globe, legal documents attached to them will not be the same.

Even on a larger scale, gold and silver markets are the markets with the highest liquidity in the world, which means that they won’t be affected by any small occurrence on the market. Only a global crisis (and one of a particular type) would drastically change the value of these assets.

Michał Kierul, CEO of INTechHouse, says, “In an ever-evolving financial landscape, the timeless value of precious metals remains a beacon of stability. Their intrinsic worth, coupled with their historical significance, makes them an indispensable asset in any diversified portfolio.”

Long historical performance

The biggest problem that people have with crypto assets is that their entire history is barely 15 years old. At the same time, you can track the value of gold millennia in the past. This means that you have more historical data to analyze.

If we were to analyze Bitcoin, chances are that every major shift was the first ever. Gold was a major asset through world wars, plagues, depressions, and recessions, so you can see what the asset is expected to behave like under any of these circumstances.

Another important thing to keep in mind is that gold is already regulated. Not much will be done regarding the regulation of this asset. This means that you know what you can expect in the future. At the same time, companies and digital assets are getting new regulations almost daily.

Great practical application

You must remember that gold and silver are not the only precious metals you could invest in. What about platinum and palladium? These precious metals don’t get nearly as much attention, but their use in industry is increasing by the minute.

Platinum is widely used in the production of nitric and sulfuric acids, both of which are the staple of the chemical industry. They’re also used in the electronic (amazing resistors, thermocouples, and electrical contacts). It also has great medical applications, especially in manufacturing pacemakers and dental equipment.

Palladium is used in the dental industry to manufacture crowns and bridges. It can also absorb large quantities of hydrogen gas, making it ideal for storage. In the chemical industry, palladium is used to manufacture pharmaceuticals, fine chemicals, and organic compounds.

It’s unique and different

Of course, we’re not suggesting that you diversify just in precious metals. Some conservative estimates mention putting 10-15% in these assets, with the rest in other asset types. In other words, you shouldn’t stop with gold.

There’s always a question of whether is it different enough than your other assets. Concerning precious metals, the answer is always a resounding yes. This makes investing in precious metals one of the most important forms of portfolio insurance.

Long-term store of value

It’s a long-term store of value that will provide you with a higher investment security. After all, you know that jewelry, gold coins, and gold bullion get passed on for generations. They’re also easy to include in a will, making estate planning much simpler.

The bottom line is that you can invest in precious metals and then just forget about this investment. Since everyone is already using platforms for trading, you’ll get a notification if there’s anything noteworthy going on.

Wrap up

The last thing you must remember is that not even gold is infallible. You must enter this with realistic expectations; otherwise, you’ll always be disappointed. No such things as safe investments or investments are guaranteed to earn you money. If there were, no one would ever put their money anywhere else. Still, concerning reliability and stability, precious metals are as good as it gets.

Nebojsa is a seasoned professional in the SEO and link-building industry with significant expertise and a history of leading successful teams. With a keen focus on client satisfaction, our team at Heroic Rankings has built a reputation for hard work, high standards, and consistent results.

 

Nikola Roza

Nikola Roza is a blogger behind Nikola Roza- SEO for the Poor and Determined. He writes for bloggers who don't have huge marketing budget but still want to succeed. Nikola is passionate about precious metals IRAs and how to invest in gold and silver for a safer financial future. Learn about Nikola here.

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