Do you have an investment strategy built to protect your savings in a recession?
Too often, investors saving for their retirement put all of their eggs in one basket without fully realizing it.
They invest in a mutual fund or an ETF and decide that the stock diversification that comes with a fund is enough to help them ride out a recession.
Unfortunately, they’re still exposed to the extreme downsides of a stock market crash or a prolonged period of market volatility.
A successful investing strategy balances factors like risk tolerance, market volatility, growth, and stability.
While an investment strategy that prioritizes growth will help you save enough for your retirement, growth-oriented investments can suffer the most during a downturn.
A diversified, balanced portfolio includes a number of assets that are more resilient to recessions and crashes.
Analysts can’t always predict the length and severity of a stock market crash or a recession, but they can tell you that they’re inevitable.
Contractions are part of the growth economy, and a smart investment strategy is prepared for slowdowns.
Article Contents
Diversification: Protect Against Uncertainty
Diversification is the practice of spreading investments across different asset classes and industries.
It may not be enough to buy into a fund that invests in a variety of different stocks. For better diversification, invest some of your wealth outside of the stock market entirely.
Stocks are among the most volatile types of equity. Overexposing yourself to a single investment is a major risk to your savings.
Diversification outside of the stock market typically looks like investing in commodities, bonds, term deposits, real estate, and gold and silver bullion.
The focus here is on bullion, an asset uniquely positioned to help your portfolio get through volatile markets and plummeting stock prices.
How To Invest In Bullion
Unlike most commodities, gold and silver present a rare opportunity to take physical possession of an asset. Many investors like the security of owning a financial product that isn’t just paper.
Bullion dealers like Global Bullion Suppliers sell investment-grade gold and silver that you can own and hold in your own home, safety deposit box, or other storage solution.
In addition to allowing you to diversify outside of the stock market, direct ownership of bullion reduces your risk of fraud or mismanagement.
It gives you a way of controlling your wealth in a way that few other assets provide.
The Historical Performance of Bullion
Bullion has been used as a store of value for much of human history. While it is no longer part of the money supply, investors still see gold and silver as intrinsically valuable.
Since 1971, when the gold standard was ended in the United States, returns on gold have compared competitively against other assets.
The average annual return on gold for that period is 7.78%, although this averages out periods of rapid price growth, rapid price declines, and some long plateaus.
These average annual returns are less than stocks but higher than U.S. bonds, and it’s important to look at what gold and silver prices do during downturns.
Bullion typically has a negative correlation to stock market performance. When markets crash, bullion is an effective way to ride out economic turmoil.
It’s also often used as a hedge against inflation, currency devaluation, and geopolitical uncertainty.
Investing in bullion decouples your wealth from the stock market. As you get closer to retirement and need more stability in your portfolio, moving your wealth into more conservative assets is a sound idea.
Bullion provides an assurance that at least some of your wealth is protected from the volatility of financial markets.
When Does It Make Sense to Invest in Bullion?
Bullion may not be the right investment for everyone, but it can add a level of stability to your portfolio that will provide great returns in the long run.
It can make a lot of sense to put some of your portfolio into bullion if these are some of your investment goals.
#1 Preservation of Wealth
If your primary goal is to preserve wealth for later on in life or to pass it down to the next generation, bullion provides a level of stability that will be hard to find in other assets.
Bullion has historically maintained its value against inflation, preserving your purchasing power when your savings are in gold and silver.
#2 Risk Management
Growth-oriented portfolios tend to focus on high-risk, high-reward stocks. These companies can provide major returns, but they can also rapidly lose value during an economic downturn.
The closer you are to withdrawing money from your portfolio, the more you want to move wealth out of riskier investments. A drop in value at the wrong time can seriously hurt your retirement plans.
#3 Direct Access
Finally, bullion provides direct access and control in a way that paper assets cannot.
As investors in companies like FTX or Enron can tell you, you can’t always trust companies that look good on paper. When you own bullion directly, that wealth is protected from bad actors.
Investing in bullion can give you peace of mind during financial crises and recessions. While other investors panic, you know that you have a backstop in gold and silver.
