There are three types of money in our society.
- Government money, which includes fiat currencies like the USD, the EURO, the Mexican PESO…
- People’s money, which includes cryptocurrencies such as Bitcoin, Ethereum, Ripple…
- And finally, we have what some people like to call god’s money, which includes precious metals such as gold, silver, platinum…
In terms of building our asset portfolio, however, we have many more options to pick from – it doesn’t all just boil down to money. We can build wealth through real estate, stocks, bonds, treasury notes…
With that said, where should you be allocating most of your effort towards building a big nice portfolio of assets? And should you still be allocating resources to gold and silver?
Well, that’s a pretty broad question that I’m only going to be telling my email subscribers (seriously – join my email newsletter, it’s free and I reveal a lot of secrets).
But I will tell you my take on commodities. More specifically, the two most famous precious metals on earth; gold and silver.
As an overall heads-up… I don’t recommend holding too much of either of them. Holding precious metals can be good to an extent, but I’m not particularly fond of them, and I’m going to tell you why.
Reasons to Buy Gold and Silver
- Historically, gold and silver have performed well in times of financial crisis.
- The price of gold has increased over time (this doesn’t apply to silver). While it has also had times of holy shit what the hell is happening here, the overall ROI if you had bought yourself 100 kilos of gold fifty years ago would be very high.
- They are scarce resources.
- They are hard to obtain.
- Gold is shiny and there is something about shiny things that humans love.
Reasons Not to Buy Gold and Silver
- In today’s globalized world, gold and silver would not be the primary currency that people would turn on to right off the bat if a financial crisis were to sink the USD.
- Precious metals aren’t just an effective currency in today’s society. Gold is hard to store (you wouldn’t want to trust a bank or a governmental institution to store your gold), so where do you put it? Do you make a hole in the floor of your room and hope that no one ever finds it?
- Making transactions with gold is also something that would just be a real pain in the ass to do. Not just for e-commerce purposes (which I don’t even know how these could be done on a gold-based economy), but think about having to carry gold with you everywhere.
- Any cryptocurrency, whether it’s Bitcoin, Facebook Libra or any other one that comes out in fifty years is a much better alternative as a form of currency than gold.
- Neither gold nor silver increase over time. One ounce of gold will always equal one ounce of gold. Sure, price can go up or down (silver is going through some bad times at the time of publishing this), but you’re always going to have the same amount over time. A dividend paying stock or a treasury note on the other hand will pay you for holding on to your investment. You don’t have to wait fifty years to watch your ROI go up – or down…
With that said, how much of your portfolio should consist of precious metals?
Well, this is a tough one. Most financial advisors out there will suggest between a 5% and a 10% of your total portfolio to be in the form of gold.
I’m not a financial advisor, but I will share with you my friendly experience.
It all comes down to how big of a portfolio you’re currently building and the amount of resources at your disposal. If you only have $1,000 to put aside for your portfolio every month, it makes no sense for you to be buying gold. It’s stupid. You shouldn’t be concerned about protecting your wealth because you aren’t wealthy. With $1,000 to spare each month, you need to be building wealth. Your focus should be stocks, real estate, bonds… things that will grow your cash.
On the other hand, if you’re making $100,000 in income each month I can see how you might want to start diversifying your portfolio and protecting yourself by buying some gold. Things that don’t really make you richer but make you feel safer.
Last advice… Do you know which commodity you should be thinking about investing in? It’s not a precious metal. It’s becoming more and more scarce and it’s the most useful thing any human being can possess. Water.
