Will Silver Help Diversify Your Portfolio?

People have been investing in precious metals since before recorded history. Silver, gold, platinum, palladium, and many other metals are traded on exchanges all over the world.

People invest in different metals for different reasons. There are many benefits to investing in silver — diversification being one of the main benefits. Silver is also a high-demand commodity. Its use is prevalent across many industries.

Silver is a great hedge against inflation and times of economic stability. Because of silver’s versatility when it comes to investing, it can be used for both short-term and long-term investment strategies. 

The U.S. Gold Bureau has helped educate investors about investing in silver and other precious metals for decades. Let’s take a look at some of the reasons silver investing may be a good move for your portfolio.

Silver is a precious metal that can be used in many applications. Silver is used in the production of batteries, jewelry, mirrors, solder, dental applications, and tableware, to name just a few. 

Because silver (and gold) have a low correlation to other tradable assets, it works well as a portfolio diversification tool. The goal of portfolio diversification is to find the balance between risk and return. Precious metals are a great way to do this. Silver, because it has an inherent worth, is a great physical asset to own over the dollar or other currencies. 

What you are essentially looking for with a precious metals investment is a counterbalance to the rest of your portfolio. If half of your investments go down, you need the other half to go up. Think of it like an investment seesaw.

Because of silver’s tendency to react inversely to the value of the dollar, it is frequently used by investors as a way to hedge against inflation. 

Silver generally reacts inversely to what is happening to the value of the dollar. When the value of the dollar is strong, the price of silver drops. When the price of silver drops, more people buy silver because it’s cheaper and they can buy more of it. When there is a surge in demand for silver, the price starts to go up again due to the laws of supply and demand. 

Silver can also be helpful during deflation. When the price of goods and services drops, silver’s spending power can increase dramatically. In fact, it’s more likely that silver’s spending power will increase during deflation than inflation. 

During times of political and economic instability, buying silver can be a wise move to protect your financial security. While your silver might not skyrocket in value, the odds of its value plummeting are pretty slim. The same can’t be said for a country’s local currency. In extremely volatile times, banks can become insolvent and you might not be able to access your money. 

Investing your money in silver during times of uncertainty can help secure your wealth until the situation begins to stabilize. 

It’s strongly suggested to pay attention to whether we are in a bull or bear market. Silver, being a smaller market than other precious metals, tends to be more volatile than metals like gold.

In a bear market, silver will plunge lower than gold. In a bull market, silver could very well outperform gold. So, if you are market-savvy, you could time your silver investment for when we are deep into a bear market and sell when we come out of it. 

Depending on your individual situation and risk tolerance, you might be comfortable with a little more or a little less than the next person. Many experts recommend making silver at least 5% to 10% of your portfolio. Of course, you can always add to that if you suspect that the stock market is about to go into a slump. 

There is no such thing as a one-size-fits-all silver investment. You must do what is right for you and your financial situation.

They say that you should never try to time the stock market. That is certainly sound advice, but precious metals such as silver do have historical trends. 

Silver experiences some lows in January and also has dips throughout June and July. Pay attention to the markets during these times and you might find yourself with a great entry point for your silver investment.

At U.S. Gold Bureau we make the process of acquiring precious metals painless and safe. We offer a variety of metals in many different forms — from beautiful and rare coins to silver and gold bars.

We know it can be stressful when you are new to purchasing precious metals. That’s why we have many educational tools to help our clients become knowledgeable savvy investors. 

If you are interested in enhancing your investment portfolio, contact our knowledgeable precious metals experts for a consultation.