Ralph Waldo Emerson, the famed 19th century American poet and philosopher, offered a keen observation of what gold, the standard of precious metals, symbolizes.
“The desire of gold is not for gold. It is for the means of freedom and benefit.”
The key word ‘means’ is all-encompassing. A balanced IRA or 401(k) has a variety of assets, including mutual and index funds. When the stock market is up, the return on investment increases in value. Equities held on to long-term produce returns, but if there’s a market downturn, investors can also see their savings wiped out. The stock market is affected by many external factors and psychological behavior of investors.
Compounding this are changes in how business is conducted across borders. Country-specific government regulations can impact stock value.
One proven way to build wealth is to diversify your investment assets — and the goal is protect your wealth against market risk, currency fluctuations and the economic winds. To balance out risk in equities, it’s prudent to also secure your future with commodities. During economic downturns or periods of high inflation, precious metals are seen as a safer alternative investment.
Precious metals have a limited supply, which means sustained demand. Gold is more prominent, but other industrial-used metals, such as platinum, have a variety of uses in new technology such as hardware that runs cloud software.
Commodities and equities are both equally important and should be carefully vetted, whether you’re a veteran financial advisor or just getting started. Preferences and taste are the intangibles at the core of investment strategies. Diversification of assets is a must.
Next, let’s consider how equities and commodities perform in comparison to each other.
How to view equities and commodities:
The stock market offers investors opportunities to own equity of a company. It’s hard to resist the urge to buy stock in brands that are ubiquitous, are splashed across headlines, on cable and network TV, and generally show promise. Industrial giants were popular a few decades ago, but have been supplanted by technology companies. Shares of companies such as Google, Apple and Amazon are worth exponentially more today than they were 5 years ago.
Stock prices can be volatile, however. Investors vigilantly monitor business developments across media and constantly buy or sell for clues to move stock to better their position. In times of uncertainty, the stock market is especially prone to volatility. The key to successful investing is setting long-term expectations, and diversifying assets to include low-risk, moderate-risk and high-risk bonds and funds. Stock value goes up and down, but for many reputable stocks, that’s simply part of growth. The stock market has produced solid returns over the past decade.