Gold Takes the Throne: The Best Asset for a Balanced Portfolio

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Gold Takes the Throne: The Best Asset for a Balanced Portfolio | https://www.themorganreport.com

Gold is essential for a balanced portfolio.

A variety of studies published by different institutions – from Harvard to Ibbotson Associates, to CPM Group – have confirmed this. The best overall performing portfolios tend to reflect a substantial percentage of gold to balance the portfolio.

Why? Because gold does best when the market doesn’t. Indeed, gold is the most negatively correlated asset to the stock market. If you are a long-term investor, then gold must make up a percentage of your portfolio.

This isn’t just my opinion. It is a fact; it is what performs best.

Silver vs. Gold

Comparing silver to gold is like comparing the S&P 500 and NASDAQ. Silver is a smaller market, much more volatile, and its moves tend to be bigger, both up and down.

However, silver is generally 85% correlated to gold. Therefore, if gold is going up, silver is going up, and in an up-market, it typically goes up faster and greater.

But the converse is also true.

When gold goes down, silver goes down faster and harder. So, while silver plays an important role in a metals portfolio, investors must be willing to accept the added risk because the added reward in the bull market is usually worth the effort.

However, there are other dynamics in the silver market that gold doesn’t get to enjoy. That is mainly to do with the industrial side – basically, the demand driven regardless of economic conditions. Surely, demand does subside in conditions like these we are currently experiencing, but not as much as people believe.

After all, silver is becoming more critical in a high-tech society.

Gold Takes the Throne

But for a balanced portfolio, gold is a must, and silver might not be. I have made clear my love for silver; I think it may very well outperform gold. But for the most balanced portfolio with the least risk, for simplicity, gold is the asset for you.

One final word of warning…

And this one is specifically for young investors.

All markets go up and down. Bitcoin, or any cryptocurrency for that matter, classify as markets, and they move up and down. What is often overlooked, or not considered, is overhead resistance.

So, while there’s a lot of fervor about certain cryptocurrencies, followed by a lot of buying activity, it then falls off substantially. However, when it starts to build back up, people who bought at high prices are very willing sellers, because they don’t want to take a loss. That’s just one of the market basics.

What I’ve observed carefully is that there is an abundance of people in the crypto space with no idea about investing fundamentals. I emphasize: the idea of “markets can only go up,” is incorrect and shortsighted.

To hear more of my thoughts on this, watch my recent interview on TD Ameritrade here.

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