With so much going on in the world these days, it’s easy to overlook the developments in the precious metal markets. Even as governments continue to devalue currencies, central banks across the globe have been accumulating gold. I think investors should start considering a small allocation in precious metals as well.
I realize that probably doesn’t sit well with many other advisers, who regard gold and silver as nothing more than shiny metal that sits in a vault, collecting dust and earning no interest or dividends.
But investors, in general, need to protect themselves from these currency devaluations, which will likely lead to inflation in the future. Even if we are currently in a deflationary environment, central banks continue to pursue inflation. I think they will, at some point be successful in achieving this goal. As such, a small allocation to precious metals could protect the purchasing power of your savings and insure your overall wealth.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
How much you should invest in precious metals, of course, depends on your portfolio and other factors. A good baseline for any investor interested in maintaining a small allocation in precious metals would be to keep a 10-to-1 ratio in mind. For these investors, every $10 you have in bonds or annuities should be matched by $1 invested in precious metals.
In the current global economic environment, precious metals look like a good short term-investment. Simply put, precious metals may be a good hedge for investors facing the myriad problems associated with the present economic environment, especially currency devaluation.
A diversified portfolio of tangible assets such as gold or silver should equal about 5% (and sometimes more) of an investor’s portfolio. That's a prudent asset-diversification strategy at any time. And in today's uncertain political and economic environment, there are many (and very sound) reasons to consider investing in precious metals to diversify your holdings.
Keep in mind, precious metals are not like other asset allocations. For example, putting money in precious metals is very different than investing in the stock market. Even the word “investment" seems a bit out of place here. Gold doesn’t pay dividends; gold doesn’t pay interest. It’s a metal that has historically been used as money. Throughout the world, gold continues to be recognized as money. As such, it offers long-term protection as our currency is devalued for investors looking to be able to maintain their lifestyles 10 to 15 years down the road.
I think silver is an even better option than gold for investors looking to diversify. Right now, the silver-to-gold price ratio is fairly high. Historically, that ratio has been 16-to-1; meaning 16 ounces of silver are valued the same as 1 ounce of gold. Right now, the ratio is far higher: 65 to 70 ounces of silver have the same dollar value as every ounce of gold. If history repeats itself, we should see that 16-to-1 ratio of silver to gold return in the near future. As such, I see far more upside with silver than I do with gold.
Allocating a portion of your assets in silver, at current prices, could offer investors and retirees one of the single best long-term investments available today. Along with gold, it is recognized as a store of value. What is not so well known is that, while gold has demonstrated a solid trend of price appreciation since 2001, more than quintupling in price, the price of silver has in the past outperformed gold.
Precious metals have been a safe haven in times of war, political strife and uncertainty. With the potential for rising inflation and the continued devaluation of paper currency as likely possibilities, I think it’s a good time to consider precious metals for your retirement portfolio.
The safest way to do that may be to own the metal outright. You can also consider gold and silver mining company’s such as Goldcorp (GG), Barrick Gold (ABX) and Newmont Mining (NEM) to name a few. For silver, consider First Majestic (AG), Silver Wheaton Corp. (SLW) and Pan American Silver Corp. (PAAS).
Kevin Derby contributed to this article.
Investment Advisory Services offered through Brookstone Capital Management LLC an SEC Registered Investment Adviser.
-
COVID Aged Your Brain Faster, Even if You Didn't Get SickWhether you contracted COVID or not, your brain took a hit. Here's what that means for your health and what you can do about it.
-
This Might Be What Your Retirement Portfolio Is MissingYou can supplement your retirement nest egg or save for other goals with a taxable brokerage account.
-
Five Things to Do if You're Forced Into Early Retirement (and How to Reset and Recover)Developing a solid retirement plan — before a layoff — can help you to adapt to unexpected changes in your timeline. Once the initial panic eases, you can confidently reimagine what's next.
-
Five Ways to Adapt Your Charitable Giving Strategy in a Changing World: An Expert GuideEconomic uncertainty, global events and increasing wealth are shaping the charitable landscape this year. Here are the philanthropic trends and some tips that could help affluent donors optimize their impact.
-
I'm an Estate Planning Attorney: These Are the Two Legal Documents Everyone Should HaveEvery adult should have a health care proxy and power of attorney — they save loved ones time, money and stress if a sudden illness or injury leaves you incapacitated.
-
I'm a Financial Professional: Here's My Investing Playbook for Political UncertaintyFor successful long-term investing in a politically charged environment, investors should focus on economic data, have a diversified portfolio and resist reacting to daily headlines.
-
The Truth About the Dark Side of Rooftop Solar PanelsRampant bankruptcies in the solar panel industry have left many consumers with systems that don't work and no way to get them fixed. Worse, they're being hounded to keep paying despite not receiving what they were promised. What can they do?
-
Six Big Beautiful Opportunities: Advisers' Guide to Tax and Client StrategiesHere are several ways financial professionals can help their clients maximize opportunities in the One Big Beautiful Bill Act, which extends key TCJA provisions, introduces increased deductions for people 65 and older and more.
-
Five Ways to Maintain Charitable Giving During Volatile Times: A Giver's GuideWhen the economic outlook is uncertain, charitable giving is even more important — and impactful. You can be strategic by using donor-advised funds, diversifying assets and prioritizing unrestricted gifts.
-
Avoid Medicare's 'Shadow Tax' With This Financial Expert's IRMAA-Busting TipsYou're cruising along in retirement, and then bam: Your Medicare premiums soar because your income crossed the limit. Take a breath. There could be a solution.
