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When it comes to investing, there is no shortage of assets to choose from. For starters, it’s easy to add any number of traditional investment assets to your portfolio — from more volatile assets, like stocks, to less-risky assets, like bonds and interest-bearing accounts, including certificates of deposit (CDs) and money market accounts. And, there are also alternative assets, likeBitcoin, that can also be an option worth considering.
While those choices can make it difficult to decide where to put your money, there’s a big benefit to having options: it makes it easier to diversify your portfolio. After all, diversification is a vital component of building a well-rounded investment portfolio as you want to build an investment strategy that can withstand the challenges of any economic environment.
But there’s one alternative asset in particular that offers unique portfolio diversification benefits to investors, and that’s gold. Investors often turn to gold due to the unique benefits it offers — and in today’s unique economic environment, a gold investment could make a lot more sense than many other types of investments.
Explore your gold IRA options online here.
4 reasons gold makes more sense than other investments right now
There are a few different reasons that gold makes more sense than many other investments right now. Here are a few to consider:
It can be an inflation hedge
One of the primary reasons investors are turning to gold is its proven track record as a hedge against inflation. That’s because, unlike traditional paper currencies, gold has intrinsic value and tends to retain its purchasing power over time. So, during periods of inflation, the demand for gold typically increases as investors seek to preserve their wealth.
And, the historical correlation between gold prices and inflation is well-documented. When inflation erodes the value of regular currencies, gold often experiences upward price movements.
In turn, including gold in a diversified investment portfolio can act as a crucial buffer against the erosive effects of inflation, making it a sensible choice in the current economic climate. After all, the most recent inflation report showed that the issue is persistent and is still causing issues with many people’s investments and budgets. So, adding gold to your portfolio could be a better move than adding stocks or bonds right now, especially if you’re looking for an inflation hedge.
Find out more about how a gold investment could benefit you here.
It can protect against economic uncertainties
The global economic landscape is marked by uncertainty, with geopolitical tensions and ongoing economic uncertainties contributing to an air of instability. And, in times of economic uncertainty, investors seek assets that are resilient and can weather market volatility.
That’s where gold, with its intrinsic value and lack of correlation with traditional financial markets, shines as a safe-haven asset. The yellow metal has a long history of being a reliable store of value during times of crisis and investors often flflock to gold as a form of insurance against unforeseen economic downturns.
And, its tangible nature and the fact that it is not subject to the same market forces as stocks or bonds make gold an attractive option if you’re looking to safeguard your investments amidst the current global uncertainties. So it may be worth adding to your portfolio — especially when the choice is between gold and another type of investment asset.
It offers unique diversification benefits
A well-diversified investment portfolio is a key principle of sound financial planning. And, gold, with its low correlation to other financial assets, provides an effective means of diversification.
That’s because when traditional investments, such as stocks and bonds, face challenges, the value of gold will typically move in the opposite direction. And, this lack of correlation between gold and traditional assets can help mitigate overall portfolio risk.
But diversification doesn’t just reduce the volatility of a portfolio. It can also enhance overall returns. Including gold alongside traditional assets introduces an additional layer of stability. In turn, gold’s unique characteristics make it a compelling choice to achieve a well-balanced and resilient investment portfolio.
There’s a technological and industrial demand
Beyond its role as a monetary and investment asset, gold has extensive applications in technology and industry. The increasing demand for electronics, medical devices and renewable energy technologies has driven the need for gold in various industrial processes.
And, as the world continues to advance technologically, the demand for gold in these sectors is expected to rise.
This dual demand for gold – both as a financial asset and an industrial commodity – adds another layer of support to its value. Unlike some investments that may be subject to shifts in market sentiment or economic conditions, gold benefits from a steady demand for its unique properties in various industries.
The bottom line
In the current economic climate, where uncertainties abound, gold stands out as a beacon of stability and resilience. As you navigate through the complexities of global markets, the reasons outlined above make a strong case for considering gold as a cornerstone in your investment portfolio. While no investment is without risk, the time-tested allure of gold positions it as a sensible choice for those seeking a reliable and enduring store of value in today’s unusual financial landscape.
Angelica Leicht is senior editor for Managing Your Money, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.
