GOLD 101: THE BASICS OF GOLD AS AN “INVESTMENT”
Should You Add Gold and Silver to Your Investment Portfolio?
Is your investment portfolio protected? What will happen to your stocks if there is inflation, war, or a crash? Well, there are two simple ways you can protect your portfolio from these types of shocks in the market - gold and silver.
Here is a look at gold and silver and whether you should add them to your portfolio.
What is gold?
For thousands of years, gold has been considered money and a store of wealth
throughout many societies. It has been considered money and a store of wealth partially because gold is inert and will not react like iron that can rust away A gold coin will more or less look the same 500 years from now as it looks today if it is left alone. Gold is a commodity that is considered valuable because there is only a finite amount of gold. This is the opposite of fiat currency (Think the US dollar or Euro), which can be printed at will by a government’s central bank.
Gold is also valuable because it requires labor to dig out of the Earth. Gold also has value as jewelry and other items.
What is Silver?
Silver is also a commodity that is considered to be a store of value. However, silver is more abundant and therefore less valuable than gold. Due to silver's higher availability, it can be used in more transactions. Also, silver is a can be a good investment for those who find gold too expensive. Silver is not inert and can tarnish over time, unlike gold which adds to it being less valuable.
Silver also has several industrial uses which makes it more valuable in terms of industrial growth.
Should gold and silver be in your investment portfolio?
Gold and silver can be considered an addition in every portfolio as a protection against inflation and shocks in the market. Also, gold and silver are often uncorrelated with stocks. That means when stocks go down, gold and silver will typically not go down with it.
How much gold and silver should be in your investment portfolio?
You don’t need that much gold and silver to hedge your portfolio. In fact, you can allocate anywhere between 2% to 7% of your portfolio to a mix of gold and silver. This can properly protect your portfolio from changing market and currency conditions.
Ways to add gold and silver to your investment portfolio
There are several ways to add gold and silver to your portfolio. Here’s a look at two of the most common ways to own gold and silver.
Physical gold and silver - You can buy gold in bullion form as either coins or bars from several bullion dealers online as well as in your local community. You can also find gold and silver bullion available at your local pawn store.
Exchange Traded Funds (ETFs) - You can also buy gold and silver through Exchange Traded Funds or ETFs. ETFs can be purchased much like a stock through your trading platform. Some of the top ETFs includes the Gold ETF (GLD), silver ETF (SLV), and the physical gold & silver ETF (CEF)
Keeping your investments protected with gold and silver
It’s a good idea to keep gold and silver in your portfolio as a hedge against rising inflation and shocks in the stock market. You can get started by adding as little as 2% of gold and silver to your portfolio. With gold and silver in your portfolio, you’ll have the peace of mind knowing that your investments are protected. Keep in mind that gold and silver are not an investment like Pepsi, they are a type of money and a way to protect your portfolio against excessive money printing.
Please check out my video about this topic on Youtube here
If this interest you and you would like to read about storing your gold overseas click here
