The beginning of spring marks a traditional time to tackle ambitious projects like cleaning out the attic or organizing the junk drawer.
However, as this new spring begins, I’ve been thinking. Why stop at just projects around the house? Spring cleaning can go beyond just your living space why not apply the same ethos to your finances? We live in a constantly changing world, and our portfolios should be built to survive and thrive in it.
Look at the financial landscape.
Certain key factors hang over the economic landscape and shape the direction it will head in. The most notable factor could be the towering size of the U.S. federal debt. The new stimulus bill has added $1.9 trillion to an already $28 trillion–sized debt pile, and more debt could be on the way in the form of an infrastructure package. This enormous debt could weaken confidence in the dollar internationally and raises the possibility of a higher tax burden. There is also rising inflation, which has worried some experts—and the Fed’s policies toward buying securities and low interest rates don’t seem to be changing soon.
The stock market has benefited from these policies in the past year, but it has many worried that the market could be on the verge of a huge bubble. The corporate world also has its own debt problem: Bloomberg reported in March that corporate debt has recently hit an all-time high, and much of this debt is in companies considered “speculative” grade.
There are also notable opportunities to take advantage of. As the world ramps up reopening, manufacturing is set for a rebound. Additionally, analysts at Bank of America have recently said they believe most “real assets” – such as commodities and property – are underpriced and are worth buying. Michael Hartnett, the bank’s chief investment strategist said “Real assets are a hedge for War against Inequality, inflation & infrastructure spending,” in a note.
With all of these factors in play, what should you think about when building your portfolio?
Make an asset checklist.
When considering new assets to keep in this world, use some of the following criteria. What assets have growth potential? Which assets are historical hedges against federal debt and inflation? Which assets could diversify against the problems in both the stock market and the value of the dollar?
Precious metals fit these criteria.
Gold and other precious metals could be perfect assets to own in the current world situation. Gold has traditionally been seen as a hedge against inflation and federal debt. Precious metals like gold, silver, and especially platinum and palladium are poised to rise with manufacturing’s return. They are also separate from the potential stock bubble.
These are some of the reasons Mark Mobius, executive chairman of Templeton Emerging Markets Group, told interviewers at CNBC that he believes a portfolio should hold at least 10 percent in precious metals, specifically gold, silver, platinum, and palladium. Will you take his advice?