Precious metals can make a powerful addition to a diversified investment portfolio. Yet, most investors have no idea how much they should invest in them. Everyone has an opinion, and it can be hard to know who to trust.
The truth of the matter is that choosing how much to invest in any one type of investment is a highly personal decision. There’s no one right answer that works for everyone. The good news is that you can find the answer that makes sense for you.
Why Diversify with Precious Metals?
Diversifying your portfolio is crucial if you want to avoid extreme risk. As the saying goes, it doesn’t pay to put all your eggs in one basket. If something disastrous happens in the one sector you’ve invested all your resources into, you may be left with little or nothing of value in your portfolio.
You could invest in different stocks for a small degree of diversification. That would be better than investing everything in one specific stock. But, what if the stock market takes a nosedive? Spreading your investments across several different sectors can help you avoid financial disaster. Here are several reasons why precious metals should be a part of the mix:
- The value of precious metals runs counter to stocks.
- Precious metals have intrinsic value.
- Precious metals are a limited resource.
- Many precious metals have a high degree of liquidity.
- Precious metals provide a hedge against inflation.
- Precious metals are a type of world currency.
Questions to Ask Yourself
If you’ve decided you want to invest something in precious metals, the next question is how much should you invest in them? How much you invest is a very personal choice. The best way to decide is to do some soul-searching to discover what you need and want from your investments. You also need to take a look at who you are and how you view the world. Start by asking yourself the following questions.
Are You a Bull or a Bear on the Economy?
Anyone new to investing has to learn the difference between being a bull and being a bear. Even after you know, it’s important to understand where you fall on that spectrum.
If you’re a bull, you’re optimistic. You expect the economy to do well in upcoming years, and you’re willing to create a portfolio that can flourish as the economy thrives. If you’re generally bullish, paper investments can be an important part of your portfolio.
However, if you see a lot of potential problems for the economy, you might want to choose more in the precious metals sector. You’re a bear if you’re hesitant to put your faith in an economy that could turn sour at any moment.
You may fall anywhere along the spectrum from bull to bear. What you need to determine is how much risk you’re willing to assume given the state and trends of the economy.
How Concerned Are You About Geopolitical Risks?
How stable does the world situation seem to you? If you’re worried about geopolitical risks, precious metals make a lot of sense. They’re valuable everywhere and continue to be so despite:
- Military conflicts
- Civil wars
- Terrorist attacks
- Riots
- Sanctions
- Overthrow of governments
How Old Are You Now?
Your age is an important factor in choosing your investment balance. Typically, younger investors can assume more risk than older investors. Here’s a common formula for determining how much to invest at the age you’re at now:
Start with 100. Subtract your age. Use the result as the percentage of your total portfolio you put into stocks. So, if you’re 21 years old, you subtract 21 from 100 to get 79. Under this method, you would invest 79% in stocks. From the other 21%, you invest in precious metals.
If, on the other hand, you’re 50 years old, your percentage would be 50%, so you would only want to invest 50% in stocks. This leaves you much more room for investing in precious metals. Remember, though, that your age is only one factor among many.
What Are Your Investment Goals?
It’s important to balance your investment portfolio in the way that will help you meet your own unique goals. If you have a short-term goal, what you choose to invest in needs to be highly focused on what the markets are doing right now and what you expect in the short-term. For your long-term goals, precious metals are a safe and reliable option.
How Much Can You Invest?
The actual amount you invest it going to depend on how much room you can make in your budget for investing. If your current emphasis is on investing, it makes sense to diversify your investment portfolio with a significant amount of precious metals. Even if you’re limited in how much you can invest right now, though, you can still add precious metals to your portfolio. In that case, you might choose bullion coins or small bars.
Is Liquidity Important to You?
Although you’re investing your money for the future, you may feel more comfortable with investments you can easily turn into cash when you need them. If liquidity is a priority, you might prefer cash investments. However, you can also take advantage of the other benefits of precious metals and still maintain liquidity. If you choose the right precious metals items, you won’t have trouble selling them if the need arises.
How Much Risk Are You Willing to Take?
Some people can tolerate more risk than others due to their personal temperament or their financial situation. If you’re concerned about risk, precious metals may be a good option for a large part of your portfolio. Whatever happens, they retain their intrinsic value.
How Important Are Dividends?
Do you want to set aside investments and wait for them to yield profit? Or, do you need the income you can get from dividends. If dividends are important to you, stocks make more sense for a larger portion of your portfolio.
Are Precious Metals Interesting to You?
There’s something to be said for enjoying the time you spend dealing with your investments. Many people find precious metals are fascinating. They like to choose the precious metals they invest in, paying attention to the form of the metal, the mint it comes from, the history of the items, and other interesting details.
How Much Faith Do You Have in Precious Metals?
How much faith you have in the investments you choose can affect how long you keep them. With enough faith in a certain type of investment, you can improve your overall commitment to investing in your future.
There are a lot of reasons to have faith in precious metals. They have intrinsic value that holds across time and cultures. Historically, they’ve always been valuable. They’re a limited resource that you can tap into now and hold as it becomes rarer and more valuable.
Will You Pass Your Investments on to Your Heirs?
Most serious investors plan to leave at least a part of their portfolio to their heirs. If you do, it’s important to consider what will still have the most value in the generations to come.
It’s very hard to gauge whether stocks will maintain their value over the long term. Companies come and go. New companies present challenges to established companies. As technology advances, companies that were once at the cutting edge can suddenly lag behind their competitors.
When you invest for your children and grandchildren, you need to take a much longer view of the economy and the world situation. One thing you can count on is that precious metals are valuable no matter what time brings. This has always been true and there’s no reason to think it will be any different in the future.
Do You Have a Precious Metals Advisor to Guide You?
Adding precious metals to your investment portfolio without proper guidance only works if you’re an expert yourself. You need advice you can count on. It’s always up to you to consider whether, how, and when to act on that advice. However, you need that initial input to understand how to choose between the vast variety of investment options available to you.
Fortunately, you can get the precious metals investment advice you need. At GMRgold.com, you can connect with precious metals advisors who can help you learn how to select precious metals products to add to your investment portfolio.
You can ask any questions that come to you about precious metals investing in general. You can find out about specific metals products that interest you. Your precious metals advisor can also tell you what’s going on in the precious metals markets now as well as what the general trends have been.
Use our convenient contact form at GMRgold.com to send us a message, or simply call us at 1 (877) 795-9585. We’re available during regular working hours of 8 am to 5 pm Central Time Monday through Friday to discuss your precious metals investment opportunities and learn more about investing in them. Make diversifying your investment portfolio a priority now to reap rewards in the future.