When the economy is good and the stock market is hitting all-time highs, it’s easy to think the good times will keep coming, and you will be able to continue building your wealth.
However, part of the mindset that allows people to grow their wealth to be able to comfortably support themselves in retirement or be left to family is being able to weather the storms, not just the nice weather.
There are strategies you can implement to preserve your wealth through an economic downturn, and potentially even grow it, and these are important to creating lasting wealth.
One of these strategies is something many investors are already turning to, and that’s bullion. Including silver and gold bullion in your portfolio is a great way to diversify your portfolio. Gold, in particular, offers many benefits that make its use as a safe haven asset ideal for weathering such economic storms as the stock market crashes to recessions.
What goes up inevitably comes down. There are no guarantees in investments, and periods of economic instability will come and go. The key to growing your wealth and making it last is building your portfolio in anticipation of these difficult times.
It’s an Inflation Hedge
Low-interest rates and low inflation have lasted decades, and many fell into the belief that they would stay low. Now, as inflation remains high and the cost of living has skyrocketed, people are facing the effects everywhere: from filling up the gas tank, paying the rent or mortgage, and buying essential groceries.
When inflation is high, the paper currency loses its purchasing power. The same amount of money no longer buys the same amount of goods because the price of goods is rapidly rising.
Commodity prices typically increase with high inflation because essential consumer goods are made of those commodities — gold being one of them. The price of gold also tends to rise in periods of high inflation, but because gold has a unique position due to its historical role in currency, it’s well suited to be used as a store of wealth.
It Stabilizes Long Term Wealth
For many people, investing their money into something that is likely to give them a good return is a priority. But for savvy investors, there is a benefit to the staying power of gold over the long term.
Many other investments need to be monitored regularly to ensure that they are performing as well this year as they did last. Adjustments may need to be made depending on their performance. But gold’s proven stability over the long term can create a corner in a portfolio that doesn’t need to be monitored and can help offset risks from other riskier investments.
It Performs Well in Volatile Markets
Many investors are familiar with the stock market, and while many have different views of stocks and the market, one thing that can be agreed upon is that the stock market and gold aren’t correlated — meaning the price of gold is essentially unaffected by the ups and downs of the stock market. In fact, the price of gold might even rise when the stock market crashes.
When the market takes a tumble is when many investors begin to remember the place gold should have in their portfolio, which creates an increase in demand and, therefore, an increase in price.
