Why Buying Gold is a Great Diversification Option
Saving is very important. A lot of people can agree that the earlier you start saving money, especially if you have very specific plans for your future, the better chances you will have at fulfilling them. And saving is not something that requires a lot of preparation. As long as you have a solid income and you reduce your expenses, you will be fine.
What About Investing, Though?
Things start to get a lot more complicated once we start introducing new practices to the formula, and among them, investing is probably one of those practices that can sound appealing at first but require a certain level of knowledge and experience to be applied properly.
The main reason why saving is often more practical than investing is because it doesn’t involve any risks. The common saving process only involves relocating some of your monthly income towards a saving income, then rising and repeating until the amount you need has been achieved.
On the other hand, investing does involve risks. Usually, the level of risks is equivalent to the profit you can generate through said investments, but this rule is not always applicable. Still, it is true that the more money you decide to put into something, the bigger chances this investment has to generate a profit.
A lot of people usually use some of their saved money to invest as well, and considering that saving involves time, it’s understandable that many don’t like the idea of losing money through investments.
However, there’s a traditional practice that involves investments that is performed by most people, from beginners to experienced investors. And this practice is diversification. In this article, we will talk about what are some of the benefits of buying gold for investment purposes, especially in the long-term run, and how diversification might save your wealth from mistakes and market fluctuations.
The Core Concept of Diversification
There’s a very famous proverb you can find all around the world, in many different languages, and this proverb is: Don’t put all your eggs in one basket.
Now, the whole concept of diversification works using this proverb as a foundation, since its main objective is to protect your money from losses, working as a safety net against investing mistakes and unexpected changes in the value of an asset or good.
Let’s Take Bitcoin as an Example
Let’s take for example a very popular asset that has overtaken the world of investments: Bitcoin. Bitcoin is a form of digital currency that is referred to as a cryptocurrency, and it works thanks to a very complex technology known as the blockchain.
Here’s a little more information in case you are interested in cryptocurrencies.
Something we can say is that Bitcoin and many other cryptocurrencies are perceived as a form of investment, since it is possible to generate a considerable profit through long-term investments and trading. Just so you get an idea, years ago a single Bitcoin’s cost was around $100, and nowadays it is valued at over $43,000!
Thing is… Bitcoin, as well as other cryptocurrencies, are very volatile assets, and its value is heavily influenced by factors outside of the actual value of the asset, thus, it is possible to lose an incredible amount of money.
A good example of how influential Bitcoin is was the whole Elon Musk situation, with him reducing the value of the digital currency by quite a lot only through tweeting. Imagine a situation in which you had invested all your money in this particular asset, just to see it drop in value by more than 20% only because someone tweeted about it!
Now, if you, on the other hand, had invested only around 20% of your income in the asset, the money you would have possibly lost would have been considerably less. This is why diversification is so important! Since many assets in the current market are impossible to predict with 100% accuracy, the best thing you can do is own several assets to ensure your wealth is safely guarded!
Here’s where gold enters the play as a very good way to diversificate your money, and protect it from speculation, inflation, and many other complex problems.
Why Gold is Such a Great Diversification Asset
Precious metals like gold are often described as one of the best diversification assets you can get for your portfolio because of their nature in the world and how useful they are for many different industries and fields.
Contrary to cryptocurrencies, gold provides palpable usefulness to society, and since it is a fixed resource provided by nature through several years of natural reactions, its value is often very stable. This is why using gold as a diversification asset is recommended: The chances of you losing money through it are very low.
And if you do things right, you might be able to generate profit through them, even if said profits are not the greatest, they still add wealth to your pocket. If you check out https://www.forbes.com/advisor/investing/how-to-invest-in-gold/, you’ll get a solid idea of the things you can do to start investing in gold!
For long-term investments, it is also possible to protect your money from things like inflation and devaluation, situations that are very common in many different countries including the United States, mainly because they are often related to socio-political situations as well as economic phenomena. Generally speaking, there’s little to lose when it comes to investing on gold, and many benefits to obtain from it, of course, as long as you are not intending to use them to generate large sums of profit through them, and only benefit from their safe and stable nature!