Why You Should Diversify Your Precious Metals Portfolio
A diversified portfolio that includes several different Precious Metals increases the safety of your holdings. Dividing your investments among Gold, Silver and Platinum, for example, breaks up the risks associated with single-metal investments. There are a number of ways to build a diverse portfolio and several best practices to ensure you invest wisely.
CREATING A DIVERSIFIED PORTFOLIO
For anyone new to investing, diversification means that you own an assortment of different assets that have uncorrelated prices. Some economists suggest that diversification requires large sums of money, but when it comes to Precious Metals, that’s not entirely accurate. With Precious Metals on the market in increments as small as 1 gram, diversifying a portfolio is possible with both small and large budgets. If spot prices of a particular metal stay stagnant, you may find that one of your other metals starts to increase in demand and market price.
Even though Gold, Silver, Platinum and Palladium are all commodities grouped under the name Precious Metals, each has a unique place in the market, with supply and demand that fluctuates independently of one another.
WHAT PRECIOUS METALS TO INCLUDE
Gold is the most popular Precious Metal in the world. Even if you can only afford a small amount, a strong portfolio will always hold some amount of Gold. Because of its popularity, Gold has a reputation of being the easiest to buy and sell, no matter the condition of current markets.
Silver is the least expensive of all Precious Metals and therefore easy to acquire on a budget. Even though history has shown that, compared to Gold, there is a smaller pool of Silver buyers, it still has a broader number of industrial uses, so there always seems to be a flow of demand.
Once you have secured holdings in both Gold and Silver, the next investment you should consider is Platinum. Platinum's rarity and industrial uses makes it a valuable investment for your portfolio.
Many people turn to Palladium bullion to balance out investment portfolios. Purchasing Palladium allows you to take advantage of its rising prominence in the market and to diversify your investment portfolio at the same time.
PLANNING YOUR ASSET ALLOCATION
Smart portfolio managers look to diversification for many benefits, including security in the event of a recession, more opportunities for high returns and to hedge against losses in the rest of their portfolio. Asset allocation takes more time than click-and-go stock trading, as does proper research to ensure that each purchase is informed and timed well. You can even diversify the type of metal investments you hold. The options include Precious Metals stocks, futures and of course, owning physical bullion.
APMEX recommends discussing the pros and cons of investing with a financial advisor or professional.