Credit: freepik via Freepik
A balanced portfolio is an investment strategy that doesn’t put all of its eggs in one basket. It spreads around the risk, investing both in high-growth, high-risk assets like stocks, low-risk assets like bonds, and alternative assets that respond differently to economic downturns.
Precious metals play a unique role in a balanced portfolio. Gold and silver tend to perform better when stock markets are in decline and when inflation is high. Both of these are signs of a lack of faith in usual economic indicators and that investors are looking for alternative strategies.
If you’re thinking about bulking your portfolio with one of these alternatives, here’s what you need to know about investing in bullion.
Silver Bullion Is More Accessible than Gold
Most of the writing you’ll find when it comes to investing in precious metals focuses on gold. But the price difference between an ounce of gold and an ounce of silver is substantial.
Investors tend to prefer owning the real thing: gold and silver bullion. But when you buy real bullion, such as coins and bars, you can’t buy a decimal point the way you might with cryptocurrency. The price difference makes silver coins vastly more accessible than gold while sharing many of the same properties. That said, the premiums on silver are higher than gold. Whereas a gold purchase can be made at around 3 to 5% over spot, silver can go for anywhere from 15 to 30% over spot. Be sure to keep this under consideration before making your purchase.
A Safe Haven During Economic Uncertainty
Precious metals investors appreciate gold and silver for a variety of reasons. They’re traditionally seen as safe haven assets. They’re tangible commodities that you can own directly (without taking on any third-party risks). Finally, prices have a history of rising when other investments like stocks are struggling.
Silver and gold are also inflation hedges. They have a long track record of holding their value relative to inflation, which is the cost of goods rising against currencies. Precious metals work well as a conservative long-term investment, especially when interest rates are very low. When inflation outpaces bond yields, gold and silver provide the answer.
Rising Industrial Demand
Unlike gold, silver is more widely used in industrial applications. That can make its prices more volatile depending on economic boom and bust cycles, but the metal is used widely in electronics, medicine, jewellery, and energy.
One of the leading markets is presently coming from solar panels, and it also plays a key role in 5G technology now being rolled out across the globe.
Industrial demand plays a significant role in silver prices, but unlike other commodities, it’s not the only factor. The safe haven element is an important part of the equation, and in broad terms, the price of the metal often follows gold in the long term, which is a much more purely speculative asset.
Does Silver Have More Upside than Gold?
The one counterpoint to silver’s accessibility and industrial demand is that it tends to have more volatility than gold. But that’s more of a double-edged sword than a disadvantage. What it means is that silver prices move more quickly than gold’s – both up and down.
It depends on who much you can afford to risk. As with any speculative investment, the longer you can wait before you need to cash out, the safer you are because you can wait out downturns.
But there are a lot of reasons to be optimistic about silver. It’s historically undervalued in comparison to gold, and any form of correction would mean major price gains.
If you want to complete a balanced portfolio, silver can go a long way toward protecting you against risks.