Diversification means spreading your investments across different asset classes, sectors, and geographies to reduce the impact of any single investment performing poorly.
The Role of Precious Metals
| Period | S&P 500 | Gold |
|---|---|---|
| 2008 Financial Crisis | -37% | +25% |
| 2020 COVID Crash (Mar) | -34% | -4% (then rallied to record highs) |
| 2022 Bear Market | -19% | -1% |
How Much to Allocate
Financial advisors commonly recommend 5–15% of a portfolio in precious metals. The exact allocation depends on:
- Your risk tolerance
- Your age and time horizon
- Your outlook on inflation and monetary policy
- Your existing asset mix
Key Principle
Diversification does not guarantee profits or prevent losses. It does, however, reduce the probability that your entire portfolio suffers a catastrophic decline simultaneously.