There is always a need to strike a balance between high risk products and low risk products. In the current economic turmoil, where there is a huge amount of uncertainty, many investors are learning how to protect their investments by diversification. Having a more balanced portfolio reduces the risk of their assets eroding. In addition, there is also the issue of inflation to ponder over. Ideally, your investments should outperform inflation. Otherwise, you are losing money.
One way to overcome the above challenges is to invest in precious metals such as gold, silver or platinum. This is not a new investment strategy. For decades, savvy investors have been investing in precious metals to hedge against uncertain economic times. Today, many investors are still using gold as a safe investment vehicle. Whenever they feel that they needed some protection, they start investing in gold. You see the demand for gold going up when the market is volatile and behaving in an erratic manner.
Even when times are good, precious metal can still be a valuable investment option. Most investors tend to put a large portion of their assets in stocks and bonds. However, some of these investments (especially stocks) have the tendency to fluctuate greatly due to sharp changes in market sentiment. To manage such risks, it is always wise to place 10% to 20% of the assets in other investments such as gold.
Inflation is inevitable in any financial market. When sharp inflation occurs, that means the purchasing power of the dollar is eroded. In this case, it may not be beneficial to hold on to cash. Cash may then be used to invest in gold, which has proven to maintain consistent purchasing power throughout pipe welder years.
In addition, gold also provides protection against the weak dollar. Currency strength fluctuates due to market changes. When the dollar is weak, it is better to be the owner of precious metals instead of cash.
The reason why the prices of precious metals such as gold are relatively stable is because of the inelastic supply of the precious metals. In other words, you won't see a sudden influx of precious metals flooding the marketplace. On the other hand, global demand for such metals have been on the rise steadily. Since pricing is affected by basic demand and supply principles, this means that the prices of precious metals also rises consistently.
Recognizing this slow but steady uprising trend, financial experts have always advised investors to place at least part of their assets in gold, silver or platinum to manage the investment risks.