31 Aug 2 Critical Reasons Why All Smart Investors Should Complement Their Portfolios With Gold and Silver
The wealthy are investing in gold and silver?
Absolutely. And you should be investing in it too.
Precious metals have been prized since the days of the cowboy, hence the gold rush, for good reason—one, those types of metals are rare, and two, no one can reproduce it. As an investor, you therefore get immediate, stable and transferable value that never fluctuates even in a hundred years. That should tell you something about the moves smart investors make when building and strengthening their portfolios. They will consider precious metals like gold and silver as a hedge to offset the devaluation of paper currency.
But Why Are Precious Metals Like Gold and Silver so Beneficial in This Financial Market?
Most people don’t even realize that back in 1933, we actually kept gold in our pockets—and used it as money.
The reason why we don’t use gold anymore as standard currency is because Franklin Delano Roosevelt removed the country off of that gold standard, resulting in citizens turning in their stock to the banks in exchange for paper money. Back in 1971, though, President Nixon officially did the incomprehensible: he “closed the gold window.” It simply meant that our very own paper currency would not be backed by gold commodities.
In other words, gold will maintain its value regardless of the value of the dollar. Since no one can recreate gold like printing and minting paper money, that would mean that since there’s a finite surplus of this commodity, it then forced us to create real wealth, resulting in massive debt ($21 trillion U.S. debt, $300 trillion world debt).
Put that into perspective, and it brings quite the challenge for investors facing a lot of risk with fluctuating devaluation and rises of a currency so volatile that there’s no telling what could happen. This is actually why stabilizing your portfolio with the one constant—gold—can do wonders for you.
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Now let’s get down to the details, on why exactly you should be investing in precious metals…
The First Reason Why Gold and Silver Should Complement Investor Portfolios
Bear in mind that we say “complement”, as precious metals should never be your front line. They’ll be your buffer—your hedge. You really don’t get much gain from investing in gold; but you won’t experience any kind of loss either. So typically the best practice for precious metal investment is to incorporate it in no more than 10% to 15% of your entire portfolio.
Here’s probably the biggest reason why you want to do that: precious metals will offset all of your risk factors.
How? Imagine a lot of your retirement investments, equity investments and real estate investments dropping in value because of the fluctuations in the market. Will you be too worried when you have the one hedge keeping you from loss—gold? No. Because gold never loses its value.
If you had 26 ounces of gold, you could buy a new car back in 1925 that would typically cost only $525. Take that same amount of gold to a dealership today for a car that’ll cost you $33,500, and you’ll even drive out of the lot with that vehicle you now own. Gold’s value never changes. It’ll be something investors can always count on.
Reason #2: De-Centralization
Remember what we said about Nixon “closing the gold window”? It means that no matter how you slice it, because gold cannot be recreated, you have a commodity outside of the control of any central organization. It’s not about what you have; it’s about what you keep.
If you own gold, it is simply yours and yours alone. You don’t own a “certificate” for gold bullion held at a bank, transferable into currency.
In a way, gold is very much like Bitcoin. In fact, many would say Bitcoin is “digital gold”, given that no one can even recreate Bitcoins, hence the “value” behind cryptocurrency. It’s completely de-centralized, no one can print and mint the paper currency for it.
It simply means that your gold won’t have different value to other organizations with differing or fluctuating listing prices. If you buy goods with gold, you can use the value of that gold as a measuring stick versus the “dollar amounts” in your wallet that may or may not be enough to accommodate the purchase in a changing currency market, theoretically.
It Is, Therefore, Important for Every Investor to Take a Fresh Look at Their Portfolio
In essence, you should consider re-balancing for diversification, which will minimize all of the risk. Never focus too much on just one asset class or industry. Also keep in mind that, surprisingly, gold and silver are actually defined as collectibles with a 28% tax rate. Despite that, storing reserves like that presents quite the cushion for a portfolio ripe with possible risk in a turbulent world of debt.
So as an investor, do yourself a favor: protect your interests well. Protect it with gold.
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