Diversifying investments reduces risk. We as investors know this. But what is the best way?
We have many options. We can simply buy in different-sized groups, or different regions of the world. We can include other asset classes in our portfolio, too, including real estate, cash, commodities and maybe alternative investments such as crypto currencies or private equity. All told, we can build a nicely uncorrelated portfolio of investments that could withstand a hurricane.
But within the commodity asset class is an important diversifier, one of the best ones out there, and that is gold.
Many people forget how gold is a store of value and offsets volatility and losses in other currencies. Further, it is a desired asset during times of inflation and war. Now, since the start of 2023, we find the yellow metal up nicely, about 5.3% on the year. That is ahead of the Dow Industrials, the S&P 500 and the Russell 2000. That's a pretty good performance, but with the uncertainties around the world, more investors are likely to gravitate toward precious metals such as gold.
What makes gold such a good investment? For one thing, you can't "print" more gold like you can with fiat currencies. Miners are searching for more gold around the world everyday and are adding to the current supply, but inventory (supply) is rather tight and has been for years. How do we know this? The 100-week moving average for the exchange-traded fund GLD ( GLD) is about $169, which translates to about about two years when gold was above $1,800 and ounce. Buyers have stepped up and purchased gold over a long period of time.
Is gold or the GLD ETF worth a buy right here? The answer is, yes, it is worth having some gold in your portfolio at all times.
During times of uncertainty and weakness, many investors reach for gold. The long term trend of the metal is up, and has been since breaking through the $,000 barrier back in 2009. Gold can be added at anytime, especially on pullbacks to that previously mentioned $1,800 level.
(GLD is among the holdings in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells this and other stocks? Learn more now.)
