Diversifying your investment portfolio should be the single most important thing for you. Always remember the saying; “Never put your all eggs in one basket.” In other words, use different baskets to put your eggs. The same principle applies in the world of investing.
Diversification ensures that all your eggs don’t go down together. When you diversify your assets into different assets like stocks, currencies, precious metals like gold, silver and platinum, you are trying to protect your investment portfolio from going down at the same time. All these assets are not correlated and move independently so with diversification, the chances of their going down together reduce.
Now, investing in precious metals like gold and silver can hedge your investment portfolio from inflation. In the last two years, FED has printed a lot of greenbacks. This increase in the money supply in the economy was needed at that time to ward off the recession and stop it from developing into a depression like what happened in 1930s. But as the economy recovers and it has started to come out of recession, this increased money supply is going to cause inflation in the economy. Now, this is not only the case with US but government is Europe and other parts of the world have also printed a lot of money to ward off the global recession that was threatening their economies. With recession now ending, most of these countries are going to suffer from inflation in this decade.
So, this decade that has just started a few days back is going to cause inflation to rise and make it an inflationary decade. When inflation rises, money loses its value. You need more to buy the same quantity of goods. Gold and silver are considered to be the best investments in times of inflation. During high inflation gold is the ultimate store of wealth.
Adding gold to your investment portfolio will hedge it against inflation to some extent. Gold and silver make excellent long term inflation hedges. By investing in gold now, you will be preserving your wealth in the coming decade. In addition to that you will also make sizable capital gain as gold prices are in an uptrend for the last many years. Right now, gold prices are at their historical peak.
Gold and silver are rather very versatile investments. When you invest in stocks, you are only investing in a stock. But when you invest in precious metals like gold and silver, you can physical own them in the shape of coins and jewelry. You can also have paper ownership in the form of gold and silver futures or in the form gold ETF or you can even invest in the stocks of a gold mining company.
In the end, it all depends on what you want to do with your money. Your investment portfolio, money, precious metals and all other things that are there in the financial world are just for your convenience. All these things are tools for living. So, in the world of investing, trading and speculating, precious metals are a means to an end. You need to know what you want to do!