Tag Archives: Diversification

An Introduction to Buying Silver 101

This article is a follow-up to our last blog which discussed the merits of owning physical gold. Both novices and long-time investors stand to benefit from a review of the basics of owning physical silver. The following list contains some, but not all, of the reasons to buy tangible silver. Some items on the list hold true for any precious metal, others are unique to silver.

  1. The most obvious reason to own silver is its comparative affordability. As I write this it?s possible to own physical silver for less than $20.00 per troy ounce. As a point of reference, gold is currently 80 times more expensive than silver. We frequently mention to our customers that it?s far more likely for silver to double in value to $37.00 than it would be for gold to double in value to $3000.00 per ounce. Simply put, if your primary motivation for buying precious metals is profit, silver offers you the best opportunity for appreciation.
  2. Silver is more of a commodity than gold. It has numerous practical uses in the fields of technology and medicine amongst others. Whereas virtually all of the gold mined throughout history is above ground and accessible, most of the silver ever mined is gone, much of it inaccessible in landfills, too expensive to recycle. Estimates of the above ground quantities of gold and silver vary wildly but all agree the accessible silver on this planet is far less than the current silver to gold 80:1 price ratio suggests. Based on supply considerations only, gold is either obscenely over valued or silver is grossly undervalued. We tend to believe the latter is true.
  3. If gold, platinum and palladium continue to trend higher many investors will choose to buy silver simply because the other metals are no longer in the average buyer?s budget. This point was touched on in our first pro silver argument. However, in this scenario silver would likely rise due to higher demand. In a precious metals bull market silver could become or already is ?the only affordable game in town? for many precious metal buyers.
  4. Readily available smaller units of silver would be far more useful in an unlikely but possible currency devaluation or financial collapse as well as during, God forbid, a natural disaster or war. Along the same lines, silver?s liquidity during a short-term financial crisis, whether it be unexpected bills or a medical emergency, makes it far more practical than its more expensive counterparts, gold, palladium and platinum.

Jack Hunt Gold and Silver, 2017 1oz US Silver Eagles Coin

There are numerous other reasons to own tangible silver, but many of these reasons apply to all precious metals, not just silver. I?ll review a few of them:

  1. Purchasing and owning tangible silver can be legally anonymous, especially if purchased through Jack Hunt Gold & Silver.
  2. Unlike bank deposits, equities, Treasuries and other paper investments, physical silver cannot default, go broke or file for bankruptcy.
  3. Physical silver is real?it is tangible. Currency, equities, Treasuries, etc., are just paper and promises from the issuer.

In conclusion it should be said that asset diversification is more important than ever in our turbulent and confusing times. We believe that a balanced portfolio should contain some traditional assets such as real estate, equities, bank accounts and cash. However, we strongly believe that a moderate percentage of one?s liquid assets be in precious metals. The non-commissioned professionals at Jack Hunt Gold & Silver would be happy to assist you in any form of precious metal related transactions. 


Diversification is the Key to a 21st Century Portfolio

It?s no secret that here at Jack Hunt Gold & Silver our focus is on buying and selling precious metals. Being confirmed Capitalists we hope that those who read this consider putting a conservative percentage of their wealth into tangible gold, silver or platinum.

However, unlike many financial “advisors,” our non-commissioned brokers will never suggest that one place a majority of their wealth into precious metals. The truth is, contrary to many of our competitors, we?ve persuaded some overly zealous hard asset fans to spend less on metals than they initially planned.

We encourage our clients to be thoughtful, deliberate and well informed before making any decisions about asset allocation. Our belief is that a properly positioned portfolio for this day and age will contain a mix of equities and cash (both domestic and foreign) along with a healthy percentage of tangible assets such as real estate and precious metals.

Why Invest in Gold and Silver

Why precious metals? At some point higher interest rates and inflation will become an issue both in the U.S. and abroad. In a rising interest rate environment, all dollar denominated assets (stocks, bonds, annuities, whole life insurance) could be at risk. That?s where precious metals come in.

Gold and silver are not correlated to conventional financial assets. Historically precious metals tend to gain, or at least retain, value during times when other asset classes are in bear markets. In fact, gold prices often move inversely to investor confidence.

gold silver diversification portfolio

Investing in gold and other precious metals as part of diversified portfolio can help reduce your financial risk. [Image: Precious Metals IRA]

Despite the obvious advantages of including precious metals in a diversified portfolio, the financial industry has, in the past, been institutionally biased against precious metals. Bankers, stock brokers, insurance agents and financial planners had an inherent conflict of interest as they did not profit when investors diversified into hard assets.

That trend appears to be changing though. We have recently seen a significant uptick in financial advisors foregoing their own economic interests. They are now suggesting that their clients purchase precious metals (even if they do not profit from such a purchase) as a safety net to offset the unpredictable nature of the stock market. In essence, they are advocating that their clients purchase gold and silver as a form of wealth insurance.

Precious Metals Reduce Financial Risk

A recent study found that investors who put 7% to 15% of their assets in precious metals enjoy superior risk-adjusted returns. Yet the average investor has less than 1% of their assets in bullion. If the average investor started allocating 10% of their assets in precious metals, imagine the shock to the financial system!

How much an individual allocates to precious metals is ultimately a personal decision that depends upon one?s life circumstances, goals, risk tolerance and future expectations. If you expect a currency crisis within your lifetime you may want to consider boosting your metals allocation.

Don?t underestimate your current asset allocation. Consider all your financial assets, from brokerage and bank accounts to savings bonds and life insurance policies. In the event of a currency crisis, your investments with these counter-parties (whose liability is your asset) could be at risk. Do you own enough tangible assets to offset that risk?

Please consider Jack Hunt Gold & Silver for all your precious metal needs. We?re locally owned and have been in the same location for over 35 years. Our “no pressure” non-commissioned brokers are here to answer your questions and execute your orders.


Diversification: Buying Gold as Investment Insurance

I believe buying gold makes sense for investors wanting diversification for their financial portfolio. Only by owning a range of different assets can you reduce the cost of uncertainty on your savings and spending power. Spreading out risk over multiple asset classes including precious metals is a simple definition of diversification.

Diversification Can Reduce Financial Risk

Historical data shows that gold can act as “investment insurance.” Gold is a simple tool for smoothing out your risk and return, and reducing your overall losses when stocks, bonds or real estate fall sharply. As with all insurance policies, this protection comes at a cost, most typically during bull markets in equities and real estate. For investors holding gold for the long term, the “premiums” associated with gold as an insurance policy are “paid” in the form of occasional weaker precious metal markets.

gold coin diversification financial portfolio

Buying gold is a smart idea for investors who want to diversify their financial portfolio.

Why You Should Use Gold To Diversify

Gold?s power for diversifying risk comes from its unique mix of four attributes:

1. Non-correlation: Gold prices don?t tend to move in the same direction as other asset classes, helping reduce the impact of sharp losses elsewhere in a portfolio. Indeed, across a matrix of 17 major asset classes only the U.S. Dollar, 3-month Treasury Bills, U.S. government bonds and corporate U.S. debt show smaller week-to-week correlations with all the other assets than gold does over the last decade.

2. Liquidity: Physical bullion is one of the deepest, heavily traded asset classes. If gold were a currency it would represent the fourth largest FX pair in the world. Starting in Asia and ending in the U.S., gold trading runs nearly 24 hours a day Monday through Friday.

3. Global demand: Gold enjoys a uniquely wide and varied user base worldwide, from investors to electronic manufacturers, jewelry producers and central banks. A series of seasonal events spur consumer demand from the wedding season in Asia, Christmas in the Christian world and the Chinese New Year amongst others.

4. No currency risk: While we tend to think of gold being quoted in U.S. Dollars, it doesn?t rely on the U.S. currency for any of its value. Instead, gold holds value against all currencies directly, making it highly useful as a hedge against a currency crisis or hyperinflation.

The history of the world?s finances will support this hypothesis: The more physical gold one owns, the lower the risk for a catastrophic loss of one?s non tangible (a.k.a. “paper”) assets, which results in greater rewards when traditional asset classes underperform or collapse.

By Douglas Trinder, Precious Metals Analyst, Jack Hunt Gold & Silver