All portfolios need diversification. Diversification allows a portfolio to be well-rounded. While some assets in a portfolio go down others go up in order to offset those losses. This is the smart way to build for the future. The key is to acquire assets that are not closely correlated to each other, like gold and stocks, or gold and dollars.

People generally acquire gold in their portfolios in order to build in safety and stability. This is because when stocks fall dramatically more people flock to gold thus increasing the value of gold and offsetting losses. The same occurs when the dollar begins to fall. As the dollar losses value some of the increase in gold is due to the dollar falling, but most of the increase typically comes from predominant buying due to fear.

When acquiring any asset for diversification one should look into how that asset itself can be diversified. Stocks for example, can be bought in U.S. companies or foreign companies. Gold can also be diverse. There are two types of gold available; bullion and rare gold coins. Both will perform different tasks in a portfolio.

Bullion is typically used for pure asset protection. 1oz of gold today can buy roughly the same amount of goods that 1oz of gold could buy 100 years ago. Therefore it is known for keeping up with inflation. Also, in the event of a dollar collapse gold’s value would skyrocket.

Rare gold coins are typically used for asset protection plus growth. However inside of this asset class one can acquire coins that will perform differently. This is due to rarity factors. The rarer a coin is the better the opportunity for growth, and the more volatile. The less rare a coin is the more it will function like an asset protection type coin.

Once you have determined your goals and objectives with your portfolio, then you can decide what types of gold to acquire. Acquiring gold is smart, and history has proven its performance. Diversification is important in your portfolio and across asset classes.

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