Investing in Precious Metals
If you’re looking to diversify your investment portfolio in case of potential market crashes, market corrections or high inflation periods, you really can’t go wrong with investing in gold or silver. After all, these hard metal assets have been around for ages. There are historical stores of value, everybody in the world over knows the value that gold and silver bring to the table. With that said, there are certain situations where you might want to look to other precious metals to invest in. At the very least, you might want to consider other precious metals to invest in for purely diversification methods. As much as it’s hard to believe, gold and silver might not be slam dunks all the time. They are proven to be historically reliable, but there are certain periods when it might not make sense to invest in gold and silver. If you are looking to diversify your portfolio and are looking to protect yourself from all sorts of market risks, you might want to consider other precious metals to invest in. Keep the following discussions in mind to help you get a clear idea as to the context of why you should look into other precious metals to invest in.
The Limitations of Fiat-based Value
Fiat money gets its name from the Latin phrase fiat lux. Fiat lux means let there be light. In the same way God said let there be light and there was light, fiat currency gains their value because the government says that otherwise worthless piece of paper has value. When government puts a legal tender on a piece of paper, that paper almost magically gains value. It has value because there is a government with taxing authority and taxing powers that stands behind that piece of paper. You have to remember that ever since early 1970′s, all US dollars no longer have anything of value behind it. It used to be that for every US dollar ever created and every printed and every US coin ever minted had a backing of gold. That’s right, the United States used to make coins with silver in them. It used to print US dollars with language that says that money can be traded in for a fixed value of gold. When the United States got off the gold standard, its money essentially became fiat money. In other words, the only reason the US dollar has value is because the might and prestige of the US government as well as its taxing power stands behind that piece of paper. See the instability that this causes? It’s no surprise that after the US went off the gold standard, inflation blew up in the United States.
In the 1970′s, the US economy grew at a snail space while inflation was sky rocketing. The spirit called stagflation made it clear in the minds of many economists and consumers alike the severe limitations of fiat based economy. If you are storing paper money in your bank account, you are essentially taking a bet that the value of that paper money will remain basically the same over time. We all know that this is not true. Inflation is the silent enemy of fiat-based value. Since there is really no recognized store of value backing up paper dollars, these paper dollars are hostage to inflation. Inflation is very simple, the more dollars are printed, the less goods they can buy. This is basic economics. When there is a huge demand as evidence by the huge number of dollars in circulation and there is a low supply of goods and services those dollars are trying to buy, the price of those items and services go up. This is a no-brainer. This is the ultimate limitation of fiat-based value. Unlike US dollars that are backed by gold or silver, fiat-based dollars don’t have such limitations.
The US government can print trillions of dollars at will and magically imbue these pieces of paper with value, thanks to the fiat system. This is the main reason why many investors go into precious metals. Precious metals have fixed values, these are hard value assets. They either have industrial muses or they are historically been used for jewelry. These two uses form a base of value that would stand a test of time. When fiat money becomes really cheap and degrades in value over time, precious metals and commodities tend to retain their value. In other words, they reflect the decreased value of paper money by going up in price.
The Reality of Market Bubbles and Corrections
It’s very important to understand the limitations of paper money because of inflation. Another key reason why you need to know how paper money is valued, is the reality of market bubbles and corrections. When a stock market goes up eventually it will hit a point where it starts to crash. Either it crashes or it experiences a correction. Either way, the upward movement of stocks stops and it starts going in reverse. That’s the reality of the equities market. That’s the reality of stock markets. This is not gonna change. This was true in the past, this is true now and will continue to be true long into the future. What matters is how you are going to invest so you can properly prepare yourself for this reality. Investing in precious metals provides a substantial amount of protection in an uncertain economy. Figuring out what other precious metals to invest in, helps you to diversify your current portfolio. You can’t just put all your eggs in one basket. You can’t just put your retirement money or your financial future in stocks or bonds. Stocks and bonds can go up and down depending on the fortunes of the market. Moreover, market bubbles and market corrections can wipe out your standard stock investments. This is why it’s very important to pay attention to portfolio diversification strategies. One key aspect of this is discovering other precious metals to invest in.
The Downside with Gold: Everybody’s Betting On It
The problem with gold is that while it is the famous of all precious metals, is that it might not be the best bet. Think of betting on gold like betting on boxing. Right before Mike Tyson fought Buster Lewis, everybody thought that the fight was a foregone conclusion. They thought that Buster Lewis was sure to fail. In fact, most people thought Buster Lewis would follow in the footsteps of most of the people that had the misfortune of going toe to toe with Mike Tyson: He was going to get knocked out in the first few rounds. Well Buster Lewis shocked the world when he actually ended up knocking out Mike Tyson. The problem with betting on Mike Tyson was that you’re not gonna get much money from your bet. You had to forecast when he was gonna knock out Buster Lewis and you basically have to make a very-very finely tailored bet for you to even get a return from your bet. Most people weren’t betting on Buster Lewis because most people thought he was gonna lose. This is what happens when there is a market correction and people start rushing to precious metals market. Most people will have their eyes fixed on gold. When this happens, the price of gold will go up. However, it could have appreciated a value much faster and much higher if everyone wasn’t betting on gold. This is a key idea to focus on.
If you’re kind of protect yourself from the limitations of fiat-based currencies and potential of market bubbles and the harm inflation can cause, it may not be a good idea to put all your eggs on gold. It may not be a good idea to bet your portfolio diversification money all on gold. You have to look at other precious metals to invest in. Why? Gold’s appreciation might be limited because everybody’s betting on the same thing. If you diversify your precious metal’s portfolio, you can pick other precious metals that might appreciate much faster and appreciate much higher. This is the downside with gold. This is the downside with saturation in general. This is the reason why seasoned and proven investors always diversify even within their diversification strategies. Precious metals are always good diversification plays. With that said, you still have to diversify within that play. Otherwise, you might get stuck with parking your money in gold and all it does is just break even. In other words, when the stock market crashes, everything hits the fan, you just basically maintain the value of your investment instead of actually making money due to the market crash.
Other Precious Metals Contenders
There are other precious metal offers on the market. Obviously, people have heard of silver and platinum. However, there are other precious metals that are often used for jewelry and that have strong industrial uses like palladium. Take a look at other precious metals to invest in. You might find a nice mix of heavy industrial usage, strong historical value and global appeal. Of course, when trying to find other precious metals to invest in, always stay focused on liquidity. You don’t want to get into an investment position that is hard to exit. The key reason you want to do this is that you want to quickly cash out when your investments appreciate in value. Another reason is that you need to be able to time your investments properly. Remember, when and if the US stock market crashes and local stock markets the world will follow suit, you are in great position to make a lot of quick money. That’s right, you can ride this stock market recoveries up and down. In fact, most stock markets don’t recover quickly. They go through quick bounces once they experience a crash. By figuring out other precious metals to invest in, you can be so liquid that you can cash out quick enough, get enough capitals so you can ride quick stock market evaluations. This is a great way of making a decent return on your investment while everybody else is losing the value of their portfolios.
Not just diversifying into precious metals, but diversifying your precious metal portfolio, you go a long way in protecting yourself from market crashes. Not only do you protect yourself, you insure that you would have enough capital to pick full advantage of any other investment opportunities that may open up in the wake of stock market crash. Keep in mind that as the stock market continues to climb up and up, the chances of correction increases. It is not a surprise why many billionaires exit the market right at the time when everybody is going crazy and make money from greed and fear that push the market forward or downward, by correctly figuring out other precious metals to invest in.