"GOLD as the Strategy Reserve"
Investors find buying and holding gold an admirable strategy for several reasons, including diversification, acting as a safe haven, and hedging against inflation.
1.Key Reasons for Investing in Gold:
Portfolio Diversification: Gold has a low or negative correlation to traditional assets like stocks and bonds, which can lower portfolio volatility and improve risk-adjusted returns. Including a small proportion of gold, like 2.5%, can improve risk-adjusted returns, demonstrating a diversification effect unmatched by other assets.
2.Hedge Against Market Volatility: Gold has a track record of protecting against market volatility, especially during economic and geopolitical instability. During significant drawdowns in equity markets, gold has often outperformed stocks, providing positive returns when equities decline.
3.Safe Haven Asset: Gold is often seen as a store of value during times of uncertainty. Investors use gold to preserve wealth during market corrections, geopolitical stress, or persistent dollar weakness.
4.Inflation Hedge: Gold can maintain its value over the long term, acting as a hedge against inflation.
5.Long-Term Returns: Gold can deliver long-term returns and is a highly liquid asset with no credit risk.
6.ESG Considerations: Gold from established investment sources is responsibly produced and adheres to high environmental, social, and governance (ESG) standards.
7.Optimal Allocation:
Experts often recommend allocating 5% to 10% of an investment portfolio to gold and other precious metals. Research indicates that ideal gold allocations are around 10-15% of portfolio risk. Adding a 10% allocation to gold can reduce portfolio drawdowns compared to a traditional 60/40 portfolio.
