What Do You Understand by Precious Metal Portfolio Diversification?
Gold is a precious metal that comes to mind when one thinks of precious metals investing. Diversification is often looked over with this particular division of investing. Though when it comes to mainstream assets, diversifying one’s portfolio is the most preferred approach. Why not apply the same approach to precious metals?
According to Forbes, the precious metal industry performed well in 2020, even during the pandemic, and is forecasted to grow in 2021. Gold bullion was up by 25%, but it was silver, going up by 48% that was the best performing precious metal in the previous year. Click here to read more.
Precious Metals for Portfolio Diversification
- Gold: This is easily the most popular precious metal across the world. Every precious metal portfolio out there will have gold, even if in small quantities. Gold has a track record of being up 80% of the time in the last 15 years, earning its popularity.
- Silver: The use of this metal in industrial applications has boosted the demand for silver. Solar power installations, global 5G rollout, all require silver. It is easier to buy and inexpensive as compared to gold.
- Platinum: This is a rare metal, once you have strengthened your portfolio with gold and silver, platinum should be your next investment. Platinum was up by 11% in 2020.
- Palladium: The demand for palladium is currently rising as it is increasingly used in manufacturing processes and investors shifting away from traditional metals.
- Rhodium: This is considered to be the rarest metal in the precious metal investing industry. The global rise in demand for this metal can be attributed to its use in the automotive industry.
Top 4 Reasons for Precious Metal Portfolio Diversification
Diversifying your precious metal portfolio is essential as it improves the return you achieve and safeguards your assets against global systemic and macroeconomic risks.
Value
Precious metals strengthen your portfolio and also add a security blanket against market volatility. They don’t fall under the same purview of paper assets like stocks, bonds, or mutual funds.
With precious metals, your portfolio will retain a level of value even in case of market changes. Do some research, to know more about precious metal pricing data.
Liquidity
Precious metals like gold and silver are readily accepted across the globe. In case of emergency, these metals can be quickly sold off for immediate cash.
Demand
Precious metals like gold and silver have always been in demand. As mentioned above, owing to their several industrial and manufacturing uses the demand for palladium, platinum, and rhodium is also rising. As long as there is demand, the value of these metals will follow an upward trend.
Volatility
Owing to the intrinsic value of precious metals, they have a natural barrier against market volatility. Precious metals aren’t entirely immune, but their value projects low volatility compared to other asset classes.
Do not put all eggs in one basket – this is an age-old idiom that has stood the test of time. Diversification secures your investment portfolio against events like recession and provides opportunities for higher returns.
