Alternative investments: Precious Metals
Invest in a commodity that holds its value over time.
Many strong portfolios utilize classic investment classes such as stocks and bonds, as a backbone. These types of investments are a great way to build capital. What they do not do, however, is protect a portfolio from when a market is underperforming. When a portfolio only has a single asset class, it is susceptible to various kinds of investment risks. For this reason, any investment advisor will tell you to diversify your portfolio. One way investors have found to diversify is through alternative investments.
Assets that do not fall within the realm of traditional assets, it is considered an alternative. They are typically difficult to handle due to low liquidity and usually high minimum investments and fee structures compared to traditional investment types.
Institutional investors and high net-worth individuals often hold alternative investments. Pensions and other institutional funds will also place a small portion of their portfolios in alternative investments.
While the initial investment in alternative asset classes is often high, transaction fees remain low due to a lower rate of turnover. Investors often hold onto these kinds of investments longer than other types of investments, which can result in tax benefits. You will probably hold onto these investments for longer than other investments, but it can result in tax benefits because investments held for over a year are subject to lower capital tax gains.
Alternative investments are often appealing to some investors because they allow you to invest in something appealing. For some, classic cars and fine art are their choices of investment. Not only can it grow in value over time, but it is also a hobby in a way.
Precious metals have held cultural significance for centuries. Investors all over the world are purchasing gold, silver, and platinum to store wealth in a physical form. Continue reading to discover the power of precious metals.
Everybody is aware of the significance of gold. Its history reaches as far back as 3500 BC when it was worked and smelted by the Egyptians. In 564 BC, the Chinese began using it as currency in and it was later used by Ancient Greeks, Romans, and then by the Spanish – as well as a metal-based currency in early Great Britain.
The Gold Standard began in the 19th century and lasted until 1914. Most worldwide currencies are no longer backed by gold, but the metal still plays a vital role in the world economy. Why is gold a good investment? Gold has maintained its value since it began to be utilized as currency, which cannot be said about paper currencies.
Further, gold has always done the opposite of what stocks and other financial instruments have done. Consider the following examples. In the 1970s, the stock market was not performing well, but gold was thriving. Then, in the 1980s and 90s, stocks were back up, but gold was down. In 2008, the global financial crash occurred, and investors began ditching their failing stocks and began investing in gold again.
Investors typically buy gold to hedge against the decline of a currency, as it is an excellent defense against inflation. Research has found that gold is the best hedge against a stock market crash. In fact, gold prices increase dramatically after a crash.
Silver is similar to gold in that it keeps its value. What sets silver apart from gold? Silver has never been defaulted on. By owning physical silver, there are no default risks, which is not something that can be said about all investments.
Silver is one of the best forms of currency as it can’t just be created, like paper money or digital currencies. It has never been defaulted on, and there is no counterparty risk, unlike stocks or bonds. Silver has actually been used as currency more often than gold.
Silver is less expensive than gold so it is easier to begin a silver collection and it is simpler to make small purchases of silver. When it comes time to sell the silver, you wouldn’t have to sell a full ounce as you would in the case of gold, because the denominations can be smaller.
Further, there are several industrial uses for silver in nearly every major industry, including electronics, medicine, and solar energy. Silver is electrically conductive, thermally conductive, and reflective. Without the metal, we would not have a lot of the amenities we have today, including cell phones!
Silver is not going away anytime soon. World demand for silver is growing. Most major government mints are experiencing a rise in sales of silver, especially in China and India.
This last precious metal is also traded around the clock on global commodities markets, and the value is often higher than that of gold in times of market and political stability. This is simply because platinum is more scarce.
Like silver, platinum has many industrial uses such as automotive parts, jewelry, chemical refining, and computers are just some of the applications that raise the demand for this precious metal.
Diversify With Guidance
Gold and other precious metals are speculative. They have experienced and will continue to experience, varying values and demand. Like every investment, there are risks and rewards. Though precious metals can’t make any promises as a lone investment, investing in gold has been, and will remain, a solid choice in the diversification of your portfolio, which should include other commodities like oil, real estate, and other hard assets.
Are you unsure about which alternative investment would work best with your portfolio? The specialized team of Goldbach Capital can guide the way. Our team has the knowledge and resources to become the trusted partner of wealthy families, offering a comprehensive range of services, by combining proprietary expertise with an external pool of first-class advisors.
Each client can decide which modules he wants to engage Goldbach Capital on. Thanks to its efficient and cost-effective solutions, Goldbach Capital is a credible alternative to existing or projected in-house organizations.
We incorporate an approach of life simplification, cost-cutting, and asset protection, growth, and monitoring, to integrate your family’s vision and core values to create the wealth management plan for you.