Any savvy investor would agree that having precious metals as part of your portfolio is a wise decision. There are many reasons people consider them a particularly good investment, and some of them will be discussed in this article, so keep reading to find out what they are.
Investing in precious metals isn’t a complex thing to do. There are different investment options you can choose from depending on which one is the most convenient for you as an investor. With the right guide, such as those you’ll find on websites like https://www.oxfordgoldgroup.com/precious-metals-investment-guide/, you can quickly identify how and where to start your investment in precious metals.
Whatever option you decide to explore, you’ll soon realize that it’s worth it. Here are several reasons precious metals are an essential part of an investment portfolio:
Hedge Against Inflation
Inflation is an enemy of investors as it could cause your assets to lose value, bringing losses that may be significant at times. However, precious metals have proven to be a hedge against inflation and economic recession. When fiat currencies lose their purchasing power, metals such as gold retain their value.
Therefore, an investor who has precious metals in their portfolio can use those as a safety net even when their other investments are dropping. Such metals also have a negative correlation to other assets, so if certain assets depreciate, precious metals may increase in value, which could be an opportunity to grow your portfolio.
Diversify Your Portfolio
When you hold only one type of asset in your portfolio, you can make good returns if the asset’s value goes up. However, you might lose a fortune if it doesn’t turn out as expected. This isn’t a risk you should take considering how so many factors influence the prices of investment assets, so you can never be certain what will happen to them in the future.
To protect yourself and your wealth for the sake of achieving financial freedom, you should consider spreading your risk among different assets. For example, your portfolio can consist of stock assets, precious metals, and real estate. If one of the assets—say, real estate—loses value, it’ll be protected by precious metals. Since precious metals are immune against inflation, they’re the best choice when it comes to assets that’ll diversify your portfolio.
Liquidity is the easiness with which an asset can be converted to cash. Investors always go for assets with high liquidity because it helps minimize the complexity of the selling process.
Precious metals have high demand, so it has higher liquidity compared to other assets. Once you list your precious metals for sale, you’ll likely get a buyer and complete the sale in a short time. High liquidity assets are especially beneficial in situations where you need to gather funds as quickly as possible.
High Potential For Returns
The goal of most investors is to get maximum returns in the long run. Generally, they’re able to make excellent returns when they have the right investment strategies. However, investing in precious metals can tip the potential of higher returns in your favor. Firstly, the high demand for those metals means you can carry out many trades if you’re a day trader.
Secondly, there are different investment options for precious metals, from bullion and futures contracts to exchange-traded funds (ETFs) and mining stocks. All of these options come with different costs and will give you different returns. You can choose the most favorable one depending on your circumstances and preferences.
Finally, precious metals such as gold have long had a general upward trend in terms of prices. Therefore, if you buy gold now and hold it for an extended period, you might be able to sell it at a profit. Moreover, holding it for a long time will qualify you for capital gains tax without affecting your tax group; hence, nothing eats into your returns.
The amount of precious metals available for mining now is less than what was before. Consequently, this has increased their demand. Moreover, central banks hold more gold in their reserves for fear of inflation or fiat currencies losing their value. This has also reduced the supply of precious metals.
While that may seem like bad news, it’s positive news for investors who’ve already purchased or are about to purchase precious metals. Low supply means high demand in the future and high prices. It also means that precious metals won’t lose value anytime soon, so the sooner you acquire them, the better.
There are numerous reasons you should make precious metals part of your investment portfolio. They offer a hedge against inflation, are stable in prices, and have a high demand. Getting precious metals is also an excellent way to diversify your portfolio, ultimately protecting your assets in bad economic times. So if you’ve yet to acquire them, there’s no better time than now to do so.