Buy Precious Metals

“Gold has a proven track record for returns, liquidity, and low correlations, making it a highly effective diversifier,” says Juan Carlos Artigas, global head of research at the World Gold Council.

These qualities are especially important for investors:

• Returns: Gold has outperformed stocks and bonds over certain stretches, though it doesn’t always beat them.
• Liquidity: If you’re buying certain kinds of gold-based assets, you can readily convert them to cash.
• Low correlations: Gold often performs differently from stocks and bonds, meaning when they go up, gold may go down or vice versa.

In addition, gold offers other potential advantages:

• Diversification: Because gold is generally not highly correlated to other assets, it can help diversify portfolios, meaning the overall portfolio is less volatile.
• Defensive store of value: Investors often retreat to gold when they perceive threats to the economy, making it a defensive investment.

Those are a few of the major benefits of gold, but precious metals (inc gold) is not without risks and drawbacks.

While gold performs well sometimes, it’s not always clear when to purchase it. Since gold by itself doesn’t produce cash flow, it’s difficult to determine when it’s cheap. That’s not the case with stocks, where there are clearer signals based on the company’s earnings.

Moreover, because gold doesn’t produce cash flow, in order to make a profit on gold, investors must rely on someone else paying more for the metal than they did. In contrast, owners of a business – such as a gold miner – can profit not only from the rising price of gold but also from the business increasing its earnings. So there are multiple ways to invest and win with gold.