Gold or Silver as Part of an Investment Portfolio
A smart investor understands the importance of having a diverse portfolio. Investments should be diversified because this helps to reduce the amount of risk to which one is exposed. Although some risks are unavoidable like systemic types of risks, one should still be investment savvy and knowledgeable enough to hedge and protect one’s portfolio from un-systemic business or financial types of risks. The goal always is to maximize returns to the highest level. Because general market risks can have an effect on almost every stock, this makes it even more important to diversify among asset classes that have much variety. The objective is to have a happy medium or balance between risk and return.
The bottom line conclusion is to know and understand that diversification helps the smart investor to manage those investment risks and reduce the volatility associated with asset price movements. A good diverse portfolio would have equities or stock, fixed income or namely bonds along with commodities, real estate and cash or cash equivalents. In addition, some other classes like art and collectibles, private equity, infrastructure and hedge funds are all a part of being diverse and some of these are sometimes put together to form what is called alternative investments. But, wait, how could one not mention precious metals like gold or silver. Yes, precious metals play a part in making a portfolio diverse. Yet again, another question. Should it be gold or silver? Now, this is a discussion to be had. So, let’s take a look further at both Gold and Silver.
Keeping in the spirit of being diverse, one may choose to invest in both Gold and Silver but one should have an understanding of the distinctions between the two. Both are referred to as precious metals because the simple fact that they occur on the earth’s crust is a rare thing; however, in regards to investing the distinctions are important. It has been stated that differences between the two can actually supercharge one’s portfolio or not supercharge it. Let’s look at some of the distinctions.
The Distinct Differences
One of the first differences is that the price of silver is more volatile. It has been shown that new silver’s total supply is close to a billion ounces each year while the gold supply each year is about 120 million ounces. Because silver’s price is much lower than gold, the annual supply of silver’s value is smaller than gold although silver’s total supply is larger. Then value is what really counts as current gold prices in terms of annual supply are 12 times larger than silver. If you are interested in investing in gold or silver, American Hartford Gold is a great company to start with.
Second up is the fact that silver is more affordable as already discussed one can get silver at a lower price but has the same similarities. One can capture and get the same gold benefits. They are both hard assets that cannot be hacked in this world of digital everything and it cannot be defaulted on as other investors can have default risks. Although silver is lower in cost than gold, financial insurance is more affordable as silver is called poor man’s gold.
Third, gold actually takes less storage space as both have to be stored in safekeeping and gold tends to have a little advantage in this regard as silver takes up more space and it will tarnish over time. Silver’s storage cost is more expensive than gold.
Fourth in reference to stockpiles, it should be pointed out that gold is bought and held by central banks and governments have stockpiles of silver that are very small.
The last distinction to be mentioned here as there are many, silver has higher or more industrial use than gold. Silver has a 56 percent usage while gold has 12 percent. Silver is in everyday items from batteries to solar panels and so much more as it has so many applications. It has been quoted and stated that silver is the most thermally conductive, electronically conductive and reflective precious metal there is as one uses it and/or sees it every day rather one realizes it or not silver is a big part of our lives.
It is important to note that industrial demands are high and actually increase in a strong economy when the economy is thriving. The demand for silver decreases or is weaker in times of recession or deflation. This clues one in on part of the story because silver unlike gold is consumed and then discarded or thrown away in the world of industrial silver’s fabrication process. There is no economic gain in trying to recover grain or tiny flakes from products made of silver. When the product is discarded or gone, so is the silver. This is why some form scrap metal junk yards in an attempt to get some type of recovery.