“Diversification” is a term that is thrown around a lot in the worlds of personal finance and precious metals. For example: In a March 30, 2021 article for Morningstar, certified financial analyst Amy C. Arnott writes, “Diversification has often been called the only free lunch” in the world of asset management. Sounds great (who doesn’t love a free lunch?), but what does “diversification” really mean when it comes to your portfolio, and how do you acquire it?
Put Your Eggs in More Than One Basket.
In her article, Arnott continues by saying that “a well-constructed portfolio can have better risk-adjusted returns than its component parts alone.” This idea is the key to understanding diversification: It’s all about minimizing your financial risk.
When deciding how to manage your hard-earned money, it’s important to know that many asset classes are available to you—each with its own benefits and level of risk. As a way of protecting your wealth from the risks associated with any one type of asset, you can place (or “allocate”) portions of your wealth into multiple asset classes. Cash, stocks, and real estate are all examples of asset classes; another is precious metals, which includes gold, silver, platinum, and palladium.
The act of allocating your money into different asset classes is known as diversification, and the resulting combination of assets makes up your portfolio. By diversifying your portfolio, you may lower your level of financial risk and could increase your profit potential over the long run.
Diversification Can Help You Weather the Storm.
Looking back on 2020, a January 7, 2021 article on Forbes.com notes, “The price of gold has now ended the year up in 17 of the past 20 years, for an impressive win rate of 85%.” Meanwhile, Reuters reports that palladium rose over $3,000/oz. for the first time on May 4, 2021. This puts palladium up more than 54% since the start of 2020.
Historically, individuals have turned to precious metals as a safe-haven asset class—a place to store and hopefully grow wealth while paper-based assets like cash and stocks falter. But precious metals can also do well in times of economic prosperity, making them a strong option for diversification.
Additionally, each type of precious metal has its own unique uses in a variety of industries, from jewelry to electronics to medicine to the automotive industry. These unique relationships can independently impact how each precious metal responds to various economic factors. In other words, you can achieve additional portfolio diversification when you secure multiple precious metals.
U.S. Money Reserve has years of experience helping individuals just like you diversify their portfolios.
At U.S. Money Reserve, our goal is to help you diversify your portfolio responsibly by providing you with exclusive and helpful information on the precious metals industry and the benefits of owning gold, silver, platinum, and palladium. To diversify responsibly is to help insure your wealth against the risks involved with owning single-asset portfolios.
As America’s Gold Authority®, we’re here to help you every step of the way as you continue to explore the world of precious metals and its opportunities for diversification and growth.