How you can protect your wealth for the long term with gold, silver, platinum, and palladium

Many people in the precious metals and personal finance worlds use the term diversification. But what does this really mean? Diversification is the act of dividing your portfolio among different asset classes. When you do this, you can help limit your exposure to the risks associated with each class, thereby helping reduce the overall level of risk in your portfolio.

U.S. Money Reserve explains how to diversify your portfolio and how diversifying with precious metals can help you protect your wealth.

A Balanced Portfolio Is Key

Diversifying your portfolio with a range of asset classes can help you smooth out the ups and downs of asset performance. A diverse asset mix may combine stocks, bonds, and money market funds with certificates of deposit (CDs), real estate, and precious metals. Each of these asset classes comes with its own benefits and risks. When you diversify your portfolio, you can find a balance between risks and rewards based on your individual goals. This way, your portfolio’s performance will not depend on one asset type.

Your comfort with diversification may depend on factors like your age and risk tolerance. For example, those approaching retirement may be more concerned with wealth protection than growth potential, and thus choose a lower-risk asset mix. Meanwhile, younger people may have a higher tolerance for risk, and may therefore consider different ways to secure potentially higher returns over time. In either case, a balanced portfolio is key. One example of a diversification strategy would be to allocate 25% of your savings to equities like bonds and stocks, 20% each to cash and precious metals, 15% to fixed income, and 10% to real estate and other asset types.

Three Steps to Diversifying Your Portfolio

Diversification is a personal process that requires reflection on your goals, financial situation, and other life changes over time. But in general, these three steps can help you get started when it comes to diversifying your portfolio.

1) Analyze your existing portfolio. Examine the current contents of your portfolio and consider whether you have enough variety to meet your needs. Are you relying heavily on cash? Do you have stocks, and if so, do you consider them short-term plays or long-term holds? Do you hold any precious metals? Experts suggest diversifying 10–25% of your portfolio with tangible assets like precious metals.

2) Consider different asset classes. When it comes to portfolio diversification, it may be beneficial to consider a mix of asset classes and within asset classes as well. For example, precious metals may respond to changes in the market differently than stocks, and each metal may respond to market changes differently from others. If a surge in silver demand leads to a surge in silver price, this demand may not affect gold prices in a similar fashion. Each precious metal can play a different role in your portfolio, so diversifying among silver, gold, platinum, and palladium within your portfolio may be an option worth considering.

3) Rebalance your portfolio over time. Once you’ve decided which asset classes to include in your portfolio, you’ll want to keep a careful eye on how they are performing. Changing market conditions and lifestyle situations such as marriage, divorce, separation, career change, a new baby, or the death of a loved one may leave you rethinking your asset allocation. It may be worthwhile to consider periodically rebalancing your portfolio. For example, a rise in inflation may lead you to try protecting your portfolio by expanding your precious metals allocation.

Why It Can Be Important to Diversify Your Portfolio with Precious Metals

Those looking to diversify their portfolios often turn to precious metals because of their history as a safe-haven asset class. This asset class can be ideal for those wanting to store and grow wealth over time and diversify their paper-based assets like cash and stocks, especially during economic downturns.

Precious metals also have practical uses in industries such as electronics, jewelry, automotive, and healthcare. Since precious metals have unique roles within these industries, they tend to respond to different economic factors than paper-based assets like stocks or cash. Therefore, securing a variety of precious metals can help you achieve additional portfolio diversification.

Learn more about how precious metals can help with portfolio diversification by speaking with a U.S. Money Reserve Account Executive today.

About U.S. Money Reserve, America’s Gold Authority®

U.S. Money Reserve is one of the nation’s largest private distributors of government-issued gold, silver, platinum, and palladium products.

Founded in 2001, U.S. Money Reserve has grown into one of the world’s largest private distributors of U.S. and foreign government–issued gold, silver, platinum, and palladium legal-tender products. Hundreds of thousands of clients across the country rely on U.S. Money Reserve to diversify their assets with physical precious metals, primarily in the form of legal-tender gold and silver coins.

U.S. Money Reserve’s uniquely trained team includes coin research and numismatic professionals equipped with the market knowledge to find products for precious metals buyers at every level. U.S. Money Reserve goes above the industry standard to provide superior customer service, with the goal of establishing a long-term relationship with each and every one of its customers. U.S. Money Reserve is based in Austin, Texas. Like them on Facebook, connect on LinkedIn, and follow on Twitter.