Precious Metal Funds – an Amazing Investment

Gold and other precious metals have proven to be a hedge against economic meltdown or turmoil and are considered a safety spot during a stock market storm. These types of investments tend to grow in the event that stocks fall short.

Gold and Market Meltdown

Beside the benefits of having a diverse investment portfolio when you choose to invest in Gold, Gold itself is betting against the dollar because it is a fiat currency without any commodity backing. Meaning, when the value of the dollar declines, the value of Gold tends to shoot up. Gold also has a correlation with the stock market. These two always tend to go in opposite directions as well. There are multiple ways to measure the risk of a mutual fund: one way is through an indicator known as R-squared. This measures how faithfully an investment follows an index.

Another way to measure the riskiness of an investment is through beta. This is a measure that analyzes the market risk of a fund. It shows how responsive the fund is to a given market index such as the S&P 500 or the Barclays Capital Aggregate Bond Index.

Stocks generally will have terrible performance when inflationary pressures are feared. This, on the other hand, becomes a wonderful avenue for gold investments.

How to choose your very precious metals fund

Most advisers explain that the reasons gold and precious metals are good in a bear market also make them historically bad in a bull market. Their volatility can help or hurt a portfolio, so they must be used wisely so not to destroy your investment. Most of these advisers would consider precious metals as seasoning rather the meat itself of your portfolio. In selecting a fund, the usual criteria should apply, according to advisers. A fund should have at least a five-year record, and the manager should have a long record in running a precious metals portfolio. The fund should also have a long record so that one can see how it performed in both a bear and a bull market, and it should be compared with other funds in its category.

Conclusion

So like in any other major financial decision or investment, proper understanding and trust in the company or person you are leaving your asset with is a must. These types of investment could most likely be considered as seasoning to your main course rather than being the main dish itself to balance out your investment portfolio.

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