People have been investing in precious metals because of its value and tangible properties. This is a powerful asset that serves as a hedge for inflation. Precious metals have been a proven store of wealth for thousands of years. In times of instability, they have been viewed by many as a safe haven, used to preserve wealth and add security to an otherwise uncertain financial future.
Precious metals will always have inherent value because they are tangible and finite resources, uncontrolled by any single government or financial institution. As such, they cannot simply be printed on a government’s whim, like paper currency. This gives precious metals a unique advantage and results in numerous benefits for investors.
The ubiquitous reason investment advisors and professionals will give you about investing in gold, silver, platinum and palladium is this: to diversify your investments.
The fundamental reason for this is simple: When one type of investment sinks, another will rise. A balanced approach to investing will keep your portfolio healthy in times of crisis. It’s not just to balance out your portfolio; it’s to effectively hedge your bets. Since gold and silver have kept their high value for thousands of years, it is safe to say that they will continue to do so through war, famine and any epic civilization-ending events. While our current technology requires not only gold and silver but platinum and palladium as well, they are also considered very safe bets for investors.
Should you still invest in precious metals? Here are some points why you should:
- Diversifying your assets is a fundamental investment strategy. Most investors primarily hold paper-backed assets – stocks, bonds and mutual funds – which in today’s globalized world can fluctuate wildly with each crisis. This is why many people diversify their portfolios with precious metals – to remove the risk of putting all their eggs in one “paper” basket.
- Liquidity. Some forms of precious metals, such as gold bullion, are valued almost entirely by their metal content and weight, making them tangible, extremely liquid assets that are uninfluenced by the myriad of other factors that threaten other investment types. In fact, precious metals are among the most liquid assets possible to hold as an investment. And when you buy them for physical possession, you always have access to them.
- Security. Because precious metals are not subject to the same forces as stocks and other paper assets, diversifying your portfolio with gold and silver can add an additional level of security for your wealth – regardless of the blunders of Washington, Wall Street and beyond.
- Hedge against inflation. As the dollar’s value continues to decline, many Americans use precious metals as a vital hedge against inflation, preserving their purchasing power for the future. In fact, as the Fed prints money in times of economic distress, the resulting loss in value suffered by the dollar tends to increase the value of metals like gold.
Aside from the possibility that precious metals can function as a backup currency, there is another reason to invest in any of the ways mentioned above: bullion and gold-derived stocks are easy to sell quickly. In the event of extreme currency devaluation or personal financial strain, you should be able to turn to your investment portfolio and liquidate valuable assets in return for cash (in any currency). Keeping precious metals in your portfolio is a great way to make sure that liquidation is possible at all times.