Everyone knows that a healthy investment portfolio consists of the right mix of stocks, bonds, cash, and even real estate.
But there is yet another important and often under-utilized resource to add to this diversification: The strength and stability of precious metals.
Although there are many different kinds of precious metals, investing in gold and silver has become the two most popular choices.
Gold and silver have been regarded as one of society’s oldest forms of currency. Their appeal comes from 1) the fact that they are a tangible asset that we can hold in our hands and 2) the observation that they tend to retain their value even as the economy tends to fluctuate.
Even with the Federal Reserve starting to show signs of finally raising US interest rates while the Euro falls, gold and silver prices can help to diversify the overall performance of your portfolio. Just check out these historical returns over time.
If you think of gold and silver as simply coin collecting, you could be missing out on the bigger picture! How important could gold and silver be to your portfolio? Consider what kind of performance you would have experienced in these markets over the past 10 years from 2001 to 2011:
• In 2001, gold was priced at $276.50 per ounce and silver was priced at $4.37 per ounce.
• By 2011, gold had increased by 454% to $1,531.00 per ounce and silver had increased by 704% to $35.12 per ounce.
• By contrast, the S&P 500 stock index had only increased by 9.54% from 1148.08 to 1257.6 points.
How to Invest in Gold and Silver:
If you’re interested in investing or actually owning gold or silver, then you should know that there are many ways to add them to your investment portfolio:
• One way is to invest in their market index through a mutual fund or ETF in the stock market. Some ETF’s claim to back each share with actual physical gold or silver which provides the investors with confidence in the fund. Although this is a very quick and easy method, it does not allow YOU to actually own the physical metal itself.
• Another way is to actually buy the physical metal in the form of bullion, bars, or coins. This is nice because you can actually hold the tangible metal. However, it is much harder to command market price for the physical metal. Plus there are security and tax issues to deal with.
• Another way is to again buy the physical metal but through a broker that can store it securely. This type of service will act as a broker for purchasing the gold and silver and then makes the arrangements for the storage and insurance of the assets at a reduced cost.
There are a few who would insist gold and silver prices lend themselves too often to bubbles in price (as they did over the past decade). But many economists argue that there are still very turbulent economic conditions ahead for the world economy.
Even though the US dollar is regaining strength and that is causing gold prices to reduce, it is only a matter of time before the Federal Reserve raises US interest rates and increases inflation. And that’s when investing in gold and silver may prove to stand as a wise hedge against the unforeseen.
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