Investors remain fearful of a potential crash and are looking to safe havens to protect their investments.
The markets may be on a tear this week with the promise of Pfizer’s new potential vaccine, however, with record-breaking daily cases (Reported 5 consecutive days of over 100,000 new cases daily in the US) the mood remains bleak. Further economic uncertainties and another stimulus, contribute to investors’ lack of confidence and continued fears that the market bubble will burst.
At the onset of the lockdowns earlier this year, the market dropped exponentially, causing many to panic. With several months of a slower economy due to shutdowns and unemployment, as well as the stimulus raising the national debt by trillions and causing the dollar to lose buying power, according to Robert Shiller’s U.S. Crash Confidence Index, fears among investors continue to increase with around 85% seeing a strong probability of a market crash the likes of the great depression or the collapse of the late 1980s, not to mention the 2008 downfall.
Shiller is a Nobel Prize-winning economist and Yale professor who has studied the market for years. In a recent NY Times Op-Ed, he suggested that the Coronavirus crisis and the November elections have driven fears of a major market crash while simultaneously, stocks are trading at high levels, saying “That volatile combination doesn’t mean that a crash will occur, but it suggests that the risk of one is relatively high. This is a time to be careful.” He concluded with “This highlights the importance of being well diversified in asset classes.”
The key to portfolio diversification is combining investments that are not correlated to one another for optimal benefits. Unlike stocks and other financial options, gold is considered a safe-haven investment and has been proven to reduce losses during periods of economic distress or instability in the markets. As gold is known as the “crisis commodity,” its price often appreciates when markets are down, minimizing detrimental risk to your portfolio.
This year alone, gold has climbed over 25%, breaking its record high in August by surpassing the $2000 per oz benchmark. In fact, the recent dip in price creates an opportunity for investors to scoop up gold at a lower price, knowing it’s bound to resume its upward trajectory, given political and economic uncertainty with more stimulus. Central banks have been buying precious metals for years to manage risk and promote stability within the country’s financial system.
Investing in precious metals has many benefits when it comes to protecting your retirement, including:
- Portfolio Diversification: Diversifying your portfolio with safe-haven assets minimizes your risk in a volatile market or economic collapse.
- Increase Profit Potential: Gold maintains and increases its value over the long-term. Since the 2008 financial crash, Gold’s value increased over 250%, reaching record highs and still rising.
- Hedge Against Inflation: When the value of the dollar decreases, the price of gold increases, increasing your buying power and ROI. Since Gold maintains its value over time, it secures your assets and provides protection against a dollar decline and inflation.
Without proper diversification, your retirement stands to be a major risk. When you put all your eggs in one stock market basket means when it crashes, your retirement account goes down with it. Stocks and ETFs alone don’t provide proper diversification. In the 2008 market crash, many investors lost over 50% of their savings for that reason alone. Paper stocks and cash don’t provide financial security if they lose their worth. When the market is down, your buying power drops as both the dollar and stocks lose value, that’s why investors turn to safe havens to protect their investments and retirement savings.
Whether rolling over an existent retirement account to a gold IRA or purchasing minted coins to grow your wealth, the possibilities of protecting your investments are endless. To learn more about the best ways to secure your retirement savings, contact an Allegiance Gold Account Executive today!