You can preserve your wealth in an uncertain economy by diversifying into multiple precious metals. At Oxford Gold Group, we often field client questions like “Should I diversify my precious metals portfolio?” While our precious metal experts almost always recommend you diversify, let’s discuss why precious metal diversification remains a vital investment strategy.
Why Precious Metal Diversification Matters
Most financial advisors understand that you should not overinvest in a single sector of the economy. Instead, you should divide your investments across asset classes to prevent a total wipeout of your portfolio due to a single economic event.
The same concept applies within an asset class, such as your precious metals portfolio. Find some of the reasons for diversifying a portfolio of precious metals below.
Offset Potential Losses
The various types of precious metals on commodity exchanges all trade independently. While you might observe a correlation between different precious metals’ prices occasionally, you will also see days when gold increases in price and palladium decrease. By diversifying into multiple precious metals, you can offset losses in one asset with gains in another.
Manage Asset Risk
Each type of precious metal comes with its own set of risks. Some precious metals have industrial applications in addition to their investment qualities. For example, manufacturers use a lot of silver when making solar panels.
If that use changes in the future, investors who manage the risk by possessing plenty of other metals will suffer less than investors who do not.
Ease Market Volatility
The prices of some precious metals prove more volatile than others. Silver represents one of the best examples of a volatile precious metal.
Silver investors take on greater risk than gold investors but reap greater rewards. To cope with the huge swings in the price of silver, we recommend investing in some of the more stable precious metals.
Achieve Financial Goals
With the volatility in equities and cryptocurrencies, many investors have entered the precious metals space for safety. While investment in precious metals rarely results in short-term windfalls, they perform well over time compared to other assets. You can view precious metals as a method to preserve your wealth in volatile market conditions to achieve your financial goals.
Metals to Include in Your Precious Metal Portfolio
When investing in precious metals, consider going both deep and wide. We suggest investing significantly in the metals you trust the most and modestly in metals you remain unsure of.
Gold, silver, platinum, and palladium are four of the most traded precious metals. However, you can also find more exotic types of precious metal in which you can invest.
Gold has remained in the portfolios of savvy investors for millennia. Until the last century, gold was the primary medium of exchange between nation-states. Aside from the beauty of the yellow metal, gold offers several benefits. Some of the main perks of holding physical gold bullion include:
- Hedge against economic downturn
- History of long-term gains
- No counterparty risk
At Oxford Gold Group, we specialize in government-minted gold coins to ensure our customers receive gold bullion of only the finest quality.
Although gold sees plenty of industrial use in the electronics sector, manufacturers of smartphones, computers, and televisions use silver far more. Like gold, silver has served as real money for millennia and remains incorruptible. Unlike cash, gold and silver bullion will not disappear in a fire or succumb to hungry pests.
For most of recorded history, platinum has commanded a higher price than gold. However, that changed soon after the turn of the century, partly due to increased competition from palladium in the automotive manufacturing industry. The platinum market remains much smaller than gold, causing excess price volatility.
When palladium emerged as the preferred metal for use in catalytic converters, it ate into platinum’s automotive market share. In recent years, palladium has traded above gold. Many investors foresee a bright future for palladium due to its usage in emerging green technologies.
Considered a semi-precious metal by some investors, copper remains plentiful and affordable. Plus, copper is widely used across multiple industries, which helps stabilize its price.
Investing in physical copper proves difficult because it takes up a lot of space when purchased in bulk. Some of the most common uses for copper include:
Rhodium deserves mention due to its high level of portability. As one of the rarest metals, it commands a high price. At times, the cost of rhodium remains so high that some investors could transport their entire net worth in their front pockets.
However, due to its small market share, rhodium experiences massive price swings in both directions.
Percentage Allocation for Each Precious Metal
When diversifying into multiple precious metals, few investors allocate the same percentage for each asset. In most portfolios, gold and silver make up the bulk of the investment, with other metals playing a support role. While investment allocations will vary based on an individual investor’s risk tolerance, a balanced precious metals portfolio could look like this:
- 60% gold
- 30% silver
- 5% platinum
- 5% palladium
Other Investments to Accompany Precious Metals
Precious metals should supplement an investor’s portfolio, not define it. Most financial advisors will recommend a 10% allocation for precious metals. In light of global market uncertainties, we suggest a more aggressive approach at Oxford Gold Group.
Our team recommends the following portfolio breakdown:
- 25% equities and derivatives
- 20% cash
- 20% precious metals
- 15% bonds, annuities, and cash deposits
- 10% real estate
- 10% cryptocurrency and other assets
Diversify Your Precious Metals Portfolio Today
Diversifying into multiple precious metals will give you security and peace of mind, especially if you hold physical bullion instead of precious metal futures and derivatives. Protect your financial future by contacting one of our precious metal experts at Oxford Gold Group. Call (833) 600-GOLD today to enjoy exclusive gold, silver, platinum, and palladium bullion deals.