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    How Much Gold and Silver Should I Own?

    The question about how much gold and silver should be part of a portfolio has dogged investors for more than a century. After all, there are no greater stores of actual value than precious metals like gold and silver. 

    However, the true answer to the question is as personal as they come. Every investor has their own goals, their own tolerance for risk, their own perception of the political and geopolitical status of the economy, and their own opinions about the long-term viability of fiat currency.

    We are not financial advisers here at JM Bullion.  We cannot tell you the “correct” portion of your portfolio to construct with precious metals like gold and silver. Instead, we are going to investigate the details of both the pros and cons of buying, owning, and investing in gold, silver, or other precious metals. We are also going to discuss the trend of gold ETFs and how investing in those vehicles compares to buying the actual metals. 

    If you’re still on the fence about how much gold and silver you should own, read on. Hopefully, we can inform you to make a decision and move forward with your investment goals.

    A note about our conflict of interest

    We know what you’re thinking. You’re thinking that there’s no way you’re going to receive a balanced set of information about buying precious metals from an online precious metals dealer like JM Bullion. 

    From the outset, however, we want to stress the fact that buying gold and silver is not always a perfect investment move for everyone. In fact, there are likely times that even the most bullish stackers might throttle back on their acquisitions of rounds, coins, and bars. 

    Even though we obviously think that gold, silver, and the rest of our metals are excellent investments overall, we want to make sure that you are buying them (or not) with your eyes wide open. They’re fabulous investments to make, but they are not perfect or without downsides.

    Reasons to Own Gold and Silver

    Let’s begin by discussing the positive aspects of owning gold and silver. Whether you are an experienced investor, a bit of a novice, or simply a person with a passing interest in owning precious metals, it’s a good idea to bear all of these different attributes in mind as reasons to consider beginning or increasing your investment:

    • Gold and silver have been reliable stores of value for thousands of years. Records indicate gold’s usage in jewelry as early as 4000 B.C., and the use of both gold and silver as currency has been taking place for nearly 4,000 years. Though the rise of fiat currency in recent times may have downplayed the importance of the two metals, the fact remains that both are still unmistakable methods of marking wealth.
    • Gold and silver may appreciate, particularly with rising inflation. As the paper money supply continues to increase, investors may turn increasingly toward precious metals as tangible portfolio pieces. Since gold and silver are nonrenewable resources, increases in demand without increases in supply will lead to only two things – an increase in the prices of gold and silver, and the growing value of portfolios with gold and silver as significant parts of them.
    • Gold and silver need no external validation from central banks or governments. One of the biggest sources of instability within many popular investment vehicles is that there is external danger in case of collapse, corruption, or malfeasance on the part of administrative entities. Governments and central banks monkey with fiat currency all the time, but gold and silver do not rely on these systems for their value. Gold and silver are inherently valuable, and the currencies bend around them.
    • Gold and silver may add needed diversification to a portfolio of stocks and bonds. Diversifying one’s portfolio is a prudent strategy as a way to mitigate the risk of declines in overall value. Unlike stocks, bonds, and other financial instruments, whose fortunes are all interconnected to varying degrees, the value of gold and silver is largely irrespective of the direction of the open market. Even if an economy crashes, gold and silver are valuable anywhere.

    Reasons to Wait on Gold and Silver

    As much as gold and silver are excellent investments, they are not always the right choice for everyone. In some cases, life situations make investing in precious metals a less prudent concept. Like all investments, buying gold and silver is a matter of timing, and it simply may not be your time to buy. Here are some reasons why you might consider waiting on a gold and silver investment:

    • You need a place to store gold and silver. Because gold and silver are physical assets, they have to take up space in the world. When they are yours, the space must be yours, too. If you don’t have a reliable and safe location to store your precious metals, you should work to secure a proper repository for your investment. After all, thieves understand that gold and silver are valuable, too. As it happens, we offer storage options for investors, so you don’t necessarily have to look very far, but there’s no denying that you need to work out where you’re going to keep your metals first.
    • You may not be able to cash out quickly. Gold and silver are decidedly less liquid than many other types of investments, particularly if those investments are online. Online stock trades can be completed in a matter of seconds, but even the fastest transaction with JM Bullion is going to take a day or two to finish. If you expect to need the cash value of your gold and silver at a moment’s notice, you probably shouldn’t convert your cash to metal at all – keep it as cash, and wait until you’re in a better spot.
    • Gold and silver can depreciate, too. Though the prices of gold and silver are only weakly correlated with the value of the economy and market at large, the value of the metals themselves is no less volatile. It is entirely possible to see outsized gains with a gold or silver investment, but the flip side is also true. If you buy at a peak in the market, you may see a precipitous decline in the value of your portfolio. If you are risk-averse, particularly with the money you’re investing, then you might want to watch, wait, and see.
    • Gold and silver grant no ownership privileges or dividends. There are many high-powered investors who swear by the value of buying dividend-paying instruments. There is some truth to that line of thinking, as an incremental drip of payouts certainly increases the value of an investment. Buying physical gold and silver is not like buying stock, however, and you will never be able to buy gold and silver such that they kick back extra flecks or pickers of metal to you at regular intervals.
    • There are few price options, and most are costly. If you plan to buy silver and, especially, gold, you have to have significant cash reserves at the ready. Some stocks are available for no more than $5 per share, but it is difficult to find any options for purchasing gold that are less than $100. If you want to buy with any amount of volume, it’s going to require a large chunk of change.

    Should I buy gold ETFs instead of physical gold?

    We don’t think so, but we can understand the allure.

    Gold ETFs, or gold exchange-traded funds, are investment vehicles that have exploded in popularity in recent years. Simply put, a gold ETF is a fund that sees its value increase or decrease with a heavy correlation to the price of gold. In other words, the value of the ETF is largely determined by the overall value of the metal itself.

    Because they are investment vehicles, however, they offer a few advantages and/or counters to some of the downsides of physical metal investment we mentioned above. For one thing, you don’t have to purchase in expensive lots, necessarily. For another, you can trade your shares more readily than you can physical gold, and there’s no real life component that you need to handle.

    However, we caution against gold ETFs as a substitute for physical gold because you’re not actually able to take physical delivery of your gold assets purchased through an ETF. At the end of the day, you still suffer from the same default and third-party risks (like governments and central banks) that any other types of investments do. In theory, an ETF’s value could drop to nothing or the ETF itself could go bust, although it’s quite unlikely. 

    When it comes to our money, though, we know that gold’s value can never be zero or go bust, even if the world crumbles around us. If we’re going to the trouble of adding gold to our portfolio, anyway, we might as well have something that actually exists.

    What percentage of my portfolio should be precious metals?

    The first thing to say about this question is to reiterate that we at JM Bullion are not financial advisors by any means. We are not qualified to give you any definitive answers about your particular situation, and – frankly – we’re not sure we would want to do so if we were.

    Financial professionals themselves are all over the map about the “correct” percentage. We have observed recommendations for 1%, and we’ve seen suggestions for 20%. The presence of such a large spread means nobody is terribly certain, and the volatility of precious metals may change the answer over time, anyway.

    The best thing to do is consider your answers to a few questions:

    • Is my portfolio diversified already, or does it need some different elements?
    • Am I concerned about accessing the cash value of a precious metals investment?
    • Do I have a safe place to store my metals?
    • How concerned am I about the stability of the world economy?
    • How tolerant of risk and volatility am I?

    Most importantly, you need to have a firm, clear, and decisive answer to this question:

    Why am I buying Gold and/or Silver? 

    If there’s a legitimate money-based reason that you have in mind, it might make sense to allocate a significant percentage. If it’s more emotional, then you may want to err on the side of caution and keep your exposure small.

    So, do your homework, talk with your family, and make as rational a decision as you can. Then, always bear in mind that nothing is set in stone. In fact, the whole reason gold and silver are available is because they are no longer set in stone. Happy investing!

    We are not financial advisers and, as such, we recommend that anyone looking to allocate precious metals to their portfolio do their own thorough due diligence and research and draw their own conclusions. In addition, we recommend that one discuss the pros and cons of such investments with their financial adviser or professional. 

    All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.