Gold: The Ideal Complement to Stocks

Moves Independently from Traditional Securities

Gold is a physical asset, meaning you own something you can hold that has inherent value. In contrast, stocks are equities that signify partial ownership in the issuing company, with no inherent value.

Gold is also among the most negatively correlated assets to stocks -when stocks go down, gold prices go up. That is why we strongly recommend allocating up to 20% of your overall financial portfolio to precious metals and rare coins.


An Ideal Way to Mitigate Risk

Every sound investment strategy should include limited high-risk growth investments offset by less vulnerable and easily liquid holdings. As this risk pyramid demonstrates, gold is safer and more liquid than even cash, providing a stable foundation for building a well-balanced portfolio.

 

Gold vs Stocks Since 2001

This conversative investment offers the highest short-term returns. One-ounce gold bullion coins minted by the U.S Mint move dollar-for-dollar with the spot gold price. Investment grade gold, also known as “bullion with muscle” offers the same benefits as bullion but with higher profit potential.


This graph shows a 2001 investment in gold bullion had grown 331% as of 12/31/16. That same investment in S&P 500 stocks grew only 72% over the same period of time.

 

Other Gold Securities

  • Mining shares are stocks that let you invest in gold indirectly through partial ownership in the companies that mine this precious metal. They hold no inherent value.
  • Exchange-traded funds (ETFs) perform based on gold market value. They are structured like an index fund but traded like a stock on an exchange, again holding no inherent value.

If you can’t hold it, you don’t own it. To capitalize fully on the portfolio diversification strengths of alternative investments, make sure your assets are tangible.

 

Gold, ETFs and Mining Shares: A Comparison

Gold ETFs Mining Shares
Strengths

  • A physical holding with inherent value
  • Hedges against paper stocks volatility
  • Balances portfolio performance
  • Protects against bank failures
  • Private, with minimal reporting requirements
  • Great liquidity; considered a currency
  • Nominal spreads

Considerations

  • Must be physically held, stored and secured
  • Must be purchased from reputable vendor to ensure quality and security
Strengths

  • Easy way to trade on gold prices
  • Can be part of a larger account for diversification purposes
  • Can buy and sell quickly
  • Good choice for short investment horizons
  • Private with minimal reporting requirements
  • Great liquidity; considered a currency
  • Nominal spreads

Considerations

  • A paper stock; holds no inherent value
  • Susceptible to exploration risks and geological/meteorological challenges
Strengths

  • High risk, with high potentail rewards
  • Can buy and sell quickly

Considerations

  • A paper stock; holds no inherent value
  • Susceptible to exploration risks and geological/meteorological challenges
  • High reporting requirements
  • Prone to leadership or human resources issues
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