Portfolio diversification is one of the most crucial principles of investments. This principle applies to both beginners and experienced investors. It’s a technique that allows an individual to invest their capital across various financial securities. Portfolio diversification aims to help maximize returns by putting investment capital in different financial instruments that’d react differently to the economic crisis. In other words, portfolio diversification means spreading your investment capital in different areas to ensure you don’t rely on a single venture.
Though there are several routes you can take to diversify your portfolio, investing in precious metals is the most profitable and secure venture, even with the seeming fall of USD in recent years. Why? Because most precious metals aren’t affected by economic downfalls. Even when nations go through trade or civil wars, pandemics, natural calamities, and other calamities, the precious metals market remains stable. So investing in precious metals can provide a haven against the dollar. Investing in precious metals can also offer protection against economic inflation.
In this article, you’ll learn all that you need to know about precious metal investment, including what precious metals are, examples of precious metals, and advantages of investing in precious metals. Continue reading to understand why you need to add precious metals to your investment portfolio.
What Are Precious Metals?
Precious metals are types of metals that are rare to find. Their scarcity makes them have a higher value than other ordinary metals. Precious metals are commonly used in jewelry, industrial processes, and other applications. One of the common features of precious metals is that they neither rust nor naturally tarnish.
While precious metals have been used for currency for many years, some are currently used in some devices. Examples of these devices include smartphones and computer software. One of the precious metals used in these devices is gold.
From time immemorial, precious metals are considered valuable metals, and different societies across the world use them as a measure of the value of their wealth.
What Are Some Common Examples of Precious Metals?
While there are different types of precious metals, this section covers the most valuable metals and their applications.
Gold
Gold is the most traded precious metal in the world. It’s considered the king of all other precious metals. Even if you’re not experienced in metal, you can easily recognize gold because of its unique, well, golden color. Gold is a scarce precious metal that can conduct electricity; and it can carry tiny charges, making it suitable for electronic devices like computers, television, phones, etc. Plus, gold doesn’t tarnish. It can be easily molded or melted to help make wires and sheets of different shapes.
Also, gold can be mixed with other metals to make alloys. Alloys made from gold make a stronger material than pure gold. All these and other many properties of gold make it have wide applications. One of these applications is the manufacture of jewelry items. Some of these items include wedding rings, awards, medals, and other precious items. Gold is also used in aerospace, dentistry, and medical industries. All these applications make gold one of the most in-demand metals in the world.
Silver
Silver is another highly traded precious metal worldwide. Like gold, silver is rare and resists corrosion. It’s also used in the beauty industry to make valuable jewelry items. Apart from its application in the jewelry world, silver is also used in electrical applications. It’s the best conductor of electricity, and that’s one reason it’s used in many industries to transmit electricity.
Also, silver is used in the medical world. It’s an antimicrobial substance which makes it the best for coating surgical items. It’s also used in the manufacture of solar panels. Solar panels manufactured from silver allow panels to capture sunlight efficiently.
Platinum
Platinum is another rare precious metal you should consider investing in. Just like other precious metals like gold and silver, platinum is traded in all seasons of the year. Because of its high resistance to heat, platinum is used in different industries. One of these industries is the electrical and electronic industries.
Such industries prefer platinum because of its low electricity voltage consumption. Platinum is also used to make hard drives that have high storage capacities. Finally, platinum is used in medical electronic gadgets that require low electricity voltage.
Palladium
While palladium is a lesser-known metal, it’s a valuable metal any investor could dip their toes in. Some of its applications include treatment of underground water and other chemical applications. It’s also used in the beauty industry to make jewelry items.
Apart from that, palladium is used in catalytic converters for vehicles and other machines. It helps convert toxic substances in the engine to less harmful materials.
Why Should You Invest In Precious Metals?
There are many reasons why you should consider investing in precious metals. Not only will you be expanding your portfolio, but you’ll be joining a highly successful and stable investment opportunity. To help nudge you in the right direction, here are 7 more reasons why you should invest in precious metals now:
1. Precious Metals Have High Demand
Due to its scarcity, precious metals are highly demanded in most sectors. Their wide applications in different sectors, as previously discussed in this article, help raise their demand level.
Unlike other investments, some precious metals like gold aren’t affected by changes in economic conditions. This means that they are always stable in all market conditions, which makes precious metals one of the best avenues in which to invest your money.
2. Hedge Against Inflation
If you’re looking to put your money in inflation-proof investments, then you should think of precious metals. They are the best investments that aren’t affected by changes in currency value. This means that your investment won’t be affected by inflation or economic depression.
Unlike other investments that tend to lose value with time, most precious metals can either add or retain their values. This means that precious metal investments will help offer future financial protection against economic uncertainties.
3. They Are Easy To Purchase
Precious metals are traded in almost all parts of the world. This means that you can easily get them from wherever you are. Also, several platforms can facilitate the purchase of precious metals. Some of these platforms include banks, bullion traders, and market dealers.
Another thing to note about investing in precious metals is that you don’t have to own the whole world to trade in them. You can start trading with little capital then increase your investment later on.
Also, any investor looking to invest in precious metals can have a wide range from which to choose. This means that even if you don’t have enough money to invest in your priority, you can always go for other less expensive options. For instance, if you find it expensive to invest in gold, you can go for silver, platinum, or any other affordable precious metal investment.
4. High Liquidity
Liquidity is an essential aspect you must look for when putting your capital in any investment. It means the ease of converting any investment to cash. Due to their value and demand, precious metals can easily be converted to cash. This means that they have a high liquidity rate.
Also, due to their nature of retaining value, investors can convert precious metals to cash at the current market price. Precious metals are also traded in all parts of the world, allowing investors to convert them into the currency of their choice. So investment in precious metals can enable you to get cash whenever you need it.
5. Provides Diversification
As earlier noted, precious metals are the best investments to help diversify your portfolio. While other asset investments can be affected by economic uncertainties, precious metals remain stable and may help you recover from losses suffered from other investments. This means that if you’ve incurred losses in other investments, you can minimize that damage by investing in precious metals.
6. They Have A Global Appeal
With many economic challenges in many countries, it’s almost impossible to predict the future global economic condition. That’s why you need to invest in financial instruments that are recognized worldwide. This ensures that your investment remains stable and attractive even when the economy isn’t good.
Precious metals are globally recognized, and investing in them helps safeguard against future economic uncertainties. This means that you can always find a market for your metals, no matter what season or circumstance.
7. Precious Metals Are Versatile
Versatility is another great reason why you must invest in precious metals. While it’s a fact that all investments come with a certain level of risk, you can reduce the risk by investing in different routes.
Precious metals provide various investment options from which to select. Some of these options include stocks, cryptocurrency coins, and real estate. This allows you to invest in other options when you find out that your priority involves some risks. For instance, you can invest in real estate or stocks if investing in crypto seems too risky for you.
Takeaway
While there are many options you can consider when it comes to portfolio diversification, precious metal can be the best option. Precious metals provide an effective diversification option for your portfolio by offering a hedge against inflation and economic crisis. They are highly in demand, which means that you can always find a market for them.
Investing in precious metals also acts as extra cash in a way, especially when you incur losses from other investments. But to ensure you don’t lose your money, you need to do some research to gain basic knowledge about precious metals investments.