Why Gold Is a Currency and What Affects Gold Prices
While many have turned to investing to secure their financial futures, some don’t know where to begin. So, let’s start with the basics of investing. Here are a few definitions, including a financial portfolio definition, to get you started.
What is investing? Investing is when you commit money with the goal of earning a positive return, which is usually financial. You invest money in order to make money based on your financial goals.
What is an investment portfolio? Investment portfolios are your total investments, which can include commodities, stocks, bonds, real estate, and precious metals.
What are the different types of investments? There are several different types of investments, including:
- Real estate
- Mutual funds
- Cash equivalents
When it comes to securing your financial future, holding your money in a bank account leaves it subject to the bank’s success, and as we found out in the 2008 financial crisis, banks can’t always be trusted with your investments. Besides, their interest rates are nothing compared to what you can make with a well-diversified portfolio.
What is a diversified portfolio anyway?
You’ve heard the term “diversified portfolio” a million times in your research on investments, but what does it really mean? Diversifying your portfolio means that you aren’t putting all of your eggs into one basket.
For example, if you’re investing in just one company, your success depends solely on that company’s success. The portion of your investment in the stock market should be diversified not only among different companies but also within the different sectors of the stock market.
What are some of the different sectors of the stock market?
- Consumer discretionary
- Consumer staples
- Health care
- Information technology
The stock market as a whole is a single asset class, and the common operating principle of financial advisors is to spread clients’ investments across various industries, with the supposed instruction and assurance that this is a “diversified portfolio.” Unfortunately, the only truly diversified asset is one that is non-correlated to everything else.
You have options that can help you diversify outside of the stock market. Investing in precious metals, for example, comes with a lot of benefits for investors looking to protect their retirement plans in case nearly every other market fails.
The benefits of investing in gold include:
- It’s a hedge against inflation.
- It’s an insurance policy against market crises.
- It’s a tangible asset.
- It protects against stock market corrections.
Here is an in-depth look at gold as an investment.
How to set a goal for your investments
Investing can be confusing if you don’t know where to begin. That’s why it’s important to define your goals for investing. You might be saving for your child’s college fund. Maybe you want to leave something for your heirs. Perhaps you just want to make sure you can retire with enough in your savings to last through your retirement. Whatever your goals are, once you set them, you’ll be able to look into the investments that will best suit your needs.
Your personal investment options are seemingly endless.
Are there risks involved with investing?
Every investment comes with its own risks. Whenever you put your money on the table there are risks involved.
Each type of investment comes with different kinds of risks. For example, the stock market correlates with the health of the economy and the value of the dollar, which means that the risk involved with stocks increases when the economy and/or the dollar does poorly. Precious metals, on the other hand, tend to increase in value under those same circumstances for each specific metal. That is why diversification is essential, and diversifying in different asset classes gives you more security for the future.
When should you start investing?
When it comes to securing your financial future, every little bit helps.
When you have a little extra saved in the bank, it’s time to start looking at your investment options. While you might not be able to invest a lot quickly, you can start building your portfolio early via various investment firms, many of which allow investors to start with low capital requirements.
When it comes to building your personal investment portfolio, the earlier you can start, the better off you’ll be in the future.
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