Asset Strategy, Retirement & Pensions

Why Your Diversified Portfolio Should Include Gold

Gold Alliance disclaimer

Building up your retirement savings is no easy task. You’ll have to make decisions about how much to save up, when to start saving, and where to place your savings. On top of that, you’re constantly being bombarded with advice about how you should invest your savings to maximize the amount of money available to you upon retirement while minimizing risk. The future is unpredictable, so what are your best options? And how do you best account for inflation and market sell-offs, which are investment busters?

Diversify Your Investments!

Historically, the economy—both in the US and globally—has gone through cycles, and those cycles will continue. As an investor, you need to take advantage of bull runs, no matter what market you’re investing in. But, you must also be prepared for downturns in the assets you’ve invested in. Since 1970, the US has survived no fewer than seven recessions and an equal number of stock market crashes. As an investor, that is a lot of instability to deal with, especially as you approach retirement age.

Don’t try to time the Market

Let’s put it this way: Don’t try to time the market. You simply cannot predict how the market is going to develop. To minimize risk, the best technique for long-term investors is to diversity your portfolio by investing in different assets. The premise is simple: by spreading your investments across many assets and asset classes, you also spread your risk. If you invest all your money in one asset or a few assets, you risk losing all your savings should those assets fail. A decrease in your total investment portfolio is what you want to avoid. By diversifying your portfolio with stock, ETFs, precious metals, bonds, etc., you also avoid big bumps in the road—some assets will decrease in value, but others will increase.

Enjoy the security of precious metals

When you diversify your portfolio, the best thing you can do for it is to include gold. The profit potential of gold is outstanding, and it offers great protection when stocks, bonds, money markets and real estate fail.

Many assets are affected by fluctuations in the US dollar, but gold is uncorrelated. For instance, when the dollar value drops (which it has over the last 100 years (see our article here), the diminished trust in the currency boosts the price of gold. In other words, when all your cash-backed assets, such as stocks, begin to drop, gold may increase, saving you from the losses experienced by investors who ignore gold. In fact, gold has historically maintained a significant inverse correlation with the strength of the US economy. During the 1980s’ high inflation, the gold price peaked. Today, high inflation seems to be creeping up on us again and as we have discussed, it’s good for gold.

When the housing market crashed in 2008 and caused most stocks to implode, gold was one of the only investments that saw an increase that year, and in the following years, between 2009 and 2011, gold soared and tripled its value in just three years. Investors holding gold saw their portfolio’s gold share grow rapidly while the stock market was still trying to recover. Investors with more than 10% gold in their portfolio experienced substantial overall growth.

Let’s look at an example where we compare a portfolio invested 100% in the Nasdaq with a portfolio consisting of 50% physical gold and 50% Nasdaq. The diversified portfolio’s returns were 127% better, and its overall risk was lower.

Ask Gold Alliance for advice

According to financial advisors, investors who are approaching retirement should be more concerned with protecting their savings than with growing them. At that time, there is simply not enough time to recover from potential losses of riskier investments. Due to the 2008 financial crisis, many seniors who had invested heavily in the stock market had to delay their retirement or reenter the workforce. The general advice is to create a portfolio that includes a mix of small- to large-cap stocks, bonds, cash, and alternative investments such as real estate and gold, which have a lower correlation with the stock market. Ask Gold Alliance how you can diversify your portfolio with precious metals so you can protect your wealth and your retirement.

You can also read our entire official guide for gold as an investment in 2021 and learn even more ways to increase the stability of your retirement portfolio.