Wednesday, September 07, 2016

Fitting Gold, Silver and Cryptocurrencies into your portfolio.

All thanks to subjecting myself to a month worth of hell in SMU, I now find myself in an enviable position of having a 5 day weekend every week. I go to classes on Mondays and Tuesdays and then the rest of the week, I can plan my time for other projects.

As I have only started on this new arrangement, I am still busy trying to catch up on my work, so I can only start blogging fairly late.

Nevertheless, BIGScribe, a business venture between the few of us financial bloggers have published our next e-book.

While I do not have a formal article in this product, I'd just like to say a few words about how precious metals can fit into your portfolio.

While gold and silver may not produce dividends, they function as very effective hedges against inflation and can allow your portfolio to profit when your bonds are taking a beating when the cost of living goes up. More importantly, Gold has a fairly low correlation of 0.1 to 0.2 against the S&P 500 so can be a wonderful addition to a primarily equity based portfolio.

My preferred approach to fit gold and silver in my portfolio is to combine both with a very humble stash of cryptocurrencies. The Ether currency has a very strong negative correlation to the S&P 500 of to the tune of -0.6. This allows a small portfolio to zig when equities zag. More importantly, these assets outperform when there is very little faith in conventional currencies when governments decide to get into a big round of quantitative easing.

You can buy gold by getting the SPDR GLD ETF ( O87 ).
There is no Silver STF in SGX so you will have to resort to buying the SLV counter from the US stock exchanges.

I would generally caution investors from taking too big positions in precious metals or cryptocurrencies. They are ideally a hedge and a simple tool to promote diversification.

So do keep your exposure to less than 5%.

If you have a Commodities ETF with oil, pork bellies and wheat, maybe you can increase your exposure to no more than 10%.

No comments:

Post a Comment