One of the investments that many professionals recommend always be held in your portfolio is gold. While gold is recommended for its protection against inflation and other market declines and should be in your portfolio at all times, gold can also outperform the market in certain times and provide the ability to do well. It can therefore pay for you to hold higher amounts of gold in your portfolio at certain market times, which will be the focus of this article.
Gold outperforms the market in poor economic times mainly as gold is considered to be a stable investment that retains its value when the market goes south. Good and other precious metals are negatively correlated to the stock market appreciating when it decreases. People flock to gold in poor economic times and use it as a way of preserving their capital. There are many reasons gold is seen as a stable investment. For one, gold has universal appeal that has lasted throughout the generations. It is used for jewelry and coins and is stored as a reserve currency by countries. There therefore is a constant base level of demand for gold and the supply of gold is limited all of which bodes well for its value when other investments are in decline. As such, when the market is in free fall or you anticipate a big decline it is likely a good time to be overweight gold in your portfolio.
Miners are still mining gold but there is a finite supply of it available in the world. Paper money, on the other hand, can always be printed by central banks and therefore does not retain the same value of gold. This makes gold an excellent investment during times of high inflation or when you expect inflation to occur. Decisions by central banks to adjust interest rates can also drive inflation risk and if you believe a move by a central bank is imminent it may be a good time to be overweight gold. In addition it makes an effective hedge if the majority of your assets are held in one currency and you want to diversify away from it.
While making an investment in good can be particularly profitable at some various points it is particularly a good idea to always hold some gold in your portfolio. One firm that specializes in good investments is the US Money Reserve, Inc who have trained experts in gold investments and can provide recommendations on how best to hold gold and to provide you with recommendations for how much to allocate it. Gold is a different investment beast than other investment classes and it makes logical sense to gain their expertise when investing in gold.