We all know the expression ‘Never put all your eggs in one basket.’ That’s diversification in a nutshell (or, should we say, an eggshell). Diversification is an incredibly popular investment strategy. It aims to reduce your overall risk by spreading your investments across a range of assets. The theory being that financial market changes will affect different assets at different times. For example, when the share market goes down, precious metals tend to hold their value.
Diversification can help you sail more smoothly through the occasional financial storm. And although it doesn’t guarantee against suffering a loss, it can be an important and effective tool in minimising risk.
Let’s take a closer look at where the idea of ‘diversification’ came from, how to choose truly diverse assets, and why Wealth99 Precious Metals Tokens have a role to play in the diversified portfolio of today.
The concept of diversification has been around for decades. It’s based on a dissertation called “Portfolio Selection” by economist Harry Markowitz, that was first published in the ‘Journal of Finance’ in 1952. This piece has guided investment theory ever since.
In his influential work, Markowitz demonstrated that a diversified portfolio is less volatile than the total sum of its individual parts. Essentially, while an individual asset might be volatile, not all assets will be volatile at the same time.
We’ve covered where the idea of diversification came from, and why it’s such a popular investment strategy. So how do you go about choosing a diverse group of assets to invest in?
Your portfolio’s arrangement of different assets from different classes is known as ‘asset allocation’. When determining their asset allocation, there are two key things investors usually take into account:
A well-diversified portfolio will generally include a blend of higher and lower risk assets. The balance between the assets is usually determined by the investor’s age and life stage. For example, the closer you are to retirement, the lower risk you might want your portfolio to be. This is because you have less time up your sleeve to ride out any market dips.
But at the end of the day, you’ll need to make your own decisions about risk and return. Everyone’s expectations and comfort levels are different. It’s always a good idea to speak to a trusted, experienced, qualified financial advisor before committing to any new investment.
Precious metals have been a tangible way to hold wealth for thousands of years – and they still are to this day. In fact, there’s been a recent surge in interest in precious metals, as savvy investors look for ways to protect their wealth from inflation and economic uncertainty. After all, as we mentioned at the start of this blog post – when share markets go down, precious metals tend to hold onto their value.
Not only that; in particularly uncertain and inflationary times (like today) the price of gold actually tends to increase. This makes it a valuable way to hedge your investments, and a valuable addition to a diverse portfolio.
We’ve established that precious metals can have a key role to play in a well-diversified portfolio. But for the everyday investor, purchasing physical precious metals is easier said than done. The process has many barriers attached – including obstacles like cost, transport, storage, and security. So, how can the 99% diversify into precious metals without the logistical headaches?
That’s where Wealth99 Precious Metals Tokens come in. Wealth99 was one of the first in the world to tokenize gold, silver, and platinum. In doing so, we’ve made it significantly easier for you to diversify into these popular precious metals.
So, how does it work? Each of our digital precious metal tokens represents one ounce of the highest quality precious metal – stored on your behalf in the vaults of one of the world’s leading bullion houses. This means, when you buy Wealth99 tokenized precious metals, you’re in fact buying the real thing. Minus the transport, logistics, storage, and security concerns.
You can choose to purchase even a tiny fraction of an ounce, meaning there’s a very low cost barrier to entry. And once purchased, the matching tokens are then stored securely in your personal wallets on the Wealth99 exchange, and are fully redeemable whenever you wish to sell.
A diverse portfolio really is a great way to reduce your risk, and protect your wealth from the market’s many ups and downs. To make tokenized precious metals part of your well-diversified portfolio, join Wealth99 today.