Smart Investment: Reasons To Diversify With Precious Metals
10 May 2023
Diversification has become essential in investing over the years, and having a diverse portfolio means greater stability and less volatility in one's investments. Furthermore, diversification allows investors to weather the inevitable spikes and drops in the financial markets and achieve potentially higher returns.
One way of going about this is by diversifying into precious metals, assets that retain their high value regardless of whether the economy is steady or volatile. Since precious metals have maintained their intrinsic values for centuries up until now, investing in them will always be a sound choice for a secure financial future. Read on to learn why investing in precious metals is one of the smartest investment decisions you can make.
1. Resistance Against Inflation
Precious metals such as gold, silver, platinum, and palladium hold intrinsic value, which means they are unaffected by fluctuations in the market. So, if the stock market suddenly crashes, taking the value of your investment portfolio along with it, you can rest easy knowing that your precious metals remain stable. During such times of market volatility, the spot price of gold and other precious metals often goes up as people feel safer investing in them.
Precious metals can also hedge against inflation, which eats away at the returns on other types of investments. For instance, if you receive a 6% return on a particular investment and inflation is at 3%, you are ultimately not profiting as much as before. However, the stable value of precious metals means their worth increases when fiat currency loses value. This allows you to preserve your purchasing power over a long period of time.
In essence, precious metals can be a safe haven that protects investors' savings from financial uncertainty caused by global disruptions and other reasons.
2. Strong Liquidity
There is always a market for precious metals, with a constant stream of buyers and sellers interested in them. This can be attributed to the fact that precious metals are tangible assets easily traded in real life. Compared to other assets like fine art and real estate, precious metals are easily accessible and priced transparently without further appraising of their value.
Fortunately, most dealers or brokers specialising in selling and buying precious metals can help facilitate such transactions. Also, suppose you want to hold onto your precious metals for investment purposes. In that case, storing them in a secure gold and silver vault in Singapore, such as The Reserve, for safekeeping is a relatively easy process.
3. Secure Investing Method
Precious metals have long been suitable as safe-haven investments due to their stability. They are also free from government influence and counterparty risk or the risk that the other party in an investment, trade, or credit transaction fails to uphold their end of the bargain.
When investing in traditional bonds and stocks and bonds, there is always the risk of the other party issuing these assets falling on hard times and being unable to honour their obligations. Investing in precious metal exchange-traded funds or EFTs also runs the risk of the institution backing the funds failing to pay as agreed.
This is not the case when investing in real and tangible precious metals that hold inherent value outside the monetary system or stock market. Diversifying directly into precious metals is also more secure than investing in mining company stocks or funds that do not grant rights to take delivery of these metals if you so choose. Buying a 100 oz gold bar gets you the exact amount you paid for with no other parties involved that may introduce counterparty risk, and you can access your precious metals whenever you need them.
4. Monetary Value
Gold and silver are and will always be considered stores of value due to them fitting all the 6 characteristics of money: durability, portability, divisibility, uniformity, limited supply, and acceptability. In fact, many of the world’s currencies take reference from gold and silver, such as the Dollar, Peso, Pound Sterling, Yuan, and many more.
5. Tangible Asset
Precious metals are tangible assets that cannot be erased or wiped away, meaning they promise value and financial security for years to come. Gold and silver are also typically passed down from generation to generation, making them an even more attractive option for securing one's financial future and simultaneously leaving a lasting legacy. As such, it is a safe and secure investment option that provides lasting peace of mind.
Although investing in precious metals is undoubtedly smart, it is not always for everyone. Investors must determine their reasons for diversifying into precious metals, be it to hedge against inflation or profit from higher prices, and choose the investment vehicle that matches their risk appetite and investment thesis.
Buying precious metals is not complicated as you have a choice of gold bars, gold coins, silver bars or silver coins.
To best secure your prized precious metals, keep them safe at The Reserve, a premier safe deposit storage in Singapore that guarantees high-security safekeeping for your wealth. Complementing this main service are our alternative asset solutions, such as authentication, digitisation for transparent asset tracking, and collateralisation via banks and other loan providers. For more details, don't hesitate to send us an inquiry today.