Achieve Ultimate Diversification
"Don't put all your eggs in one basket." You've heard the saying before, but what does it mean? In the case of your portfolio, it means not to rely too heavily on just one type of asset. Diversification is critical for the protection and health of your portfolio.
What is a well-diversified portfolio?
A well-diversified portfolio ideally comprises assets whose returns move in opposite directions—a phenomenon also called inverse correlation. When two assets in the same portfolio are inversely correlated, you have achieved effective diversification—and that should be your goal when you diversify your portfolio.
What happens if my portfolio isn’t diversified?
When you have a retirement account that only has different types of paper assets such as stocks and bonds, you are not diversified in an effective or optimal way. When the market implodes, those assets will drop—and typically they’ll drop at the same time, pulling your entire portfolio down with them. You can only achieve true and effective diversification and real portfolio protection if you own a hard asset outside the mainstream financial markets to diversify your paper assets that are inside those markets.
How do I achieve optimal diversification?
Well, there’s one asset that stands out among the rest, and that’s gold. As an asset that is isolated from stocks, the precious metal will safeguard your portfolio when the stock market tumbles. Gold is also inversely correlated with the dollar, meaning when the value of the dollar goes down, the value of gold rises. What better way to protect your wealth than to achieve optimal diversification by investing in gold, which has a proven record of countering the risks and threats to your long-term retirement goals?