A Balanced Portfolio with Precious Metals

Investing on Solid Ground

The foundation of a portfolio should be likened to the foundation of a home. A home’s foundation is a load-bearing concrete slab designed to stabilize and support a structure that’s built upon it. A properly diversified portfolio should be based on investment vehicles that promote overall stability and economic security.

Precious metal ETF’s, mining stocks, commodity options, stocks, and futures contracts are considered speculative in nature and carry a heightened level of risk. Physical precious metals are viewed as a hedge because there is zero risk associated with debt. In other words, no one is borrowing or loaning against the tangible precious metals you own.

Hedging in Metals and Speculating in Stocks

A properly balanced portfolio should consist of products intended to hedge, and investments designed to speculate. A speculative investment is utilized for the possibility of gains while assuming a possible risk of loss. For example, stock investments are commonly viewed as speculative investments. A speculative stock investment can go to zero in value.

A investment hedge is a way to protect against total loss. A hedge is a way to offset stock market volatility and speculative investment risk. Physical precious metals are an example of a commonly used investment hedge.

Precious metals have a comparatively low or negative correlation when compared to stock investments. When the value of stocks decreases, precious metals are likely to rise in value and promote portfolio balance and stability. Gold and silver coins are commonly utilized to offset the risks associated with speculative stock investments.

When it comes to gold’s comparison with stocks, gold is considered a safer and more conservative long-term investment. When stock values decline, the value of gold should rise and offset market volatility. This is why gold is generally viewed as a portfolio insurance policy.

Unlike stocks, the return of investment in gold is based entirely on the appreciation of the commodity value. Paper investments offer dividends or interest to offset the inherent risk of default. Once again, when you own physical precious metals, no one is borrowing or loaning against your physical holdings.

Peace of Mind with Proper Diversification

Properly diversifying your investment portfolio is essential to reduce risk and build long-term wealth. You can protect your portfolio from market volatility and potential economic downturns with a proper balance of investment vehicles designed to hedge and speculate.

Precious metals are not prone to mismanagement or mishandling by corporations or government entities. Precious metals are not subject to possible default caused by government policy changes. For example, when you own a gold Eagle coin, your coin is free from any risk associated with the reliance on counterparty performance.

The percentage of physical precious metals you own should be based on the current market trends and your personal financial goals.

The following article is created by Orion Metal Exchange for the benefit of our investors and perspective investors alike. We seek to provide relevant content concerning precious metals and the impact caused by the economy and geopolitical trends that will most likely place impact on your financial future. If you are interested in learning about precious metal investing, call 1-800-559-0088, for a FREE investor kit.

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