In times of strong economic growth, your stock portfolio is more than likely to grow along too. Whether you have a mutual fund managed by a real human being or an algorithm-managed Exchange Traded Fund, the goal is often to match growth on the market, allowing you to benefit from widespread economic prosperity.
But some investors aren’t content to watch their savings grow alongside everyone else’s. They want to beat the market, and that can be a smart investing strategy. Not every year is a good one on the stock market, and the past 20 years alone have seen some of the worst stock market crashes in history.
In an effort to beat market performance, many investors reach for high-risk, high-reward assets. The problem is, high-risk means you’re more likely to lose money than make a profit.
This is where owning gold can change the dynamics of your portfolio. Gold is widely seen as a safe-haven asset, meaning prices perform better than stocks during tough economic times.
What Is the Best Way to Buy Gold?
Buying gold bullion directly from an online gold dealer is the safest way to invest in precious metals at a reasonable price. Check out gold coins and bars available with a dealer like Global Bullion Suppliers. They’ll offer a variety of precious metals products, including coins and bars of various sizes from mints and refiners around the world.
How to Beat the Market with Gold
When the market struggles, rising gold prices will help balance out losses on the stock market. What you do from there depends on how much risk you can tolerate.
If you keep your portfolio arranged the way it is, gold prices will make your losses easier to stomach, and you can confidently ride it out until markets recover. You can redirect more of your savings to gold, knowing that they won’t disappear the next day.
The other option is to rebalance your portfolio. As a rule of thumb, it’s said that you should rebalance your portfolio when your asset allocation changes by more than 5 percent.
This happens when assets perform at different rates. If you’re aiming to have 10 percent of your portfolio in gold, but prices rise while stocks crash, you can wind up with an excess of gold.
When you rebalance, you sell the asset that’s performed well and buy the asset that has performed poorly. This may seem counter-intuitive – why sell an asset that’s growing? It’s because you can’t predict when prices will peak.
By rebalancing, you’re freeing up funds that allow you to buy stocks cheap, which will become profitable once the market returns to growth. If that return to growth is still months away, you still have plenty of exposure to gold.
To really beat the market, you have to invest when others don’t have confidence in stocks. Balancing your portfolio with gold is a strategic way to get the capital to buy stocks at a discount.
Be ready for a crisis. Use gold as a strategic asset to outplay the market and watch your savings grow.