What is Gold’s Role in an Investor’s Portfolio?

Introduction: What is the Purpose of Having Gold in my Portfolio?

Gold is widely valued as a wealth preservation asset, functioning as a hedge against risks faced from the exposure of your other assets and therefore, is a fantastic diversification tool to have for any portfolio. I am sure most of us bought health insurance so that we have something to fall back on when our bodies fall sick. What will happen if our assets “fall sick”? Gold is well-known for its safe-haven characteristics, so when a disastrous event strikes the economy and crashes most markets, Gold will see the inflow of capital, effectively giving us the support that we need at the point of time.

Now that vaccines have been introduced and widely available, countries, economies and the markets are all in a recovery stage. Businesses are slowly picking up as countries open up, putting the stock market back on pace. Like it or not, the pandemic has left lasting effects on our daily lives and the economy. Whether you are talking about ballooning debts of countries from the huge stimulus packages, or the inflation, stagflation, devaluation of currencies, and what actions will the Federal Reserve really take, we do not know how all these will pan out, and so there are always going to be uncertainties lingering in the market. What Gold is capable of, is to give you that layer of protection around your financial health.

Wealth preservation doesn’t mean you need to accumulate hundreds of thousands or millions of dollars before you start taking action to protect your wealth.  No, that’s not the case. Say for example, you have accumulated savings of $2,000 from your income, that is your wealth to protect. Whether that same $2,000 holds its true value 10, 20 or 50 years down the road, it depends on the adequate measures taken to preserve wealth.

Furthermore, there are so many solutions that precious metals bring to the table. Physical bullion is recognised and accepted worldwide, if you need cash and yet you still want to continue holding to your precious metals (say maybe you see there is still more upside potential to prices), what you can do here, is simply use your precious metals to take a collateral loan! Problem solved! You still get to keep your holdings and will now have the additional cash to do whatever you want, whether it is for your own personal use or maybe buy into other alternate assets. The collateral loan we are talking about here is using your assets, in this case, precious metals, as a collateral to get a loan of cash for your use. Precious metals are one of the few assets that are accepted as collateral and given a fair value for the loan.

We hear people saying, “Save to invest, don’t save to save” and the goal for investing is for wealth preservation, not wealth creation. I hope this article has given you some insights on wealth preservation and the role precious metals can play in this concept.

Sin Pong