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Just How Much Gold And Silver Is Enough…. For Your Needs

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@silverd510
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Afternoon everyone….

I know it’s silver porn Saturday. But I came across an article on Goldsilver.com that I thought would be a more interesting post. The article is written by Senior Analyst Jeff Clark. The title is “How much gold and silver should I buy for my portfolio”.

I was going to post the link right here and discuss the topic from my perspective. But for some reason it won’t paste on the post. It just leaves a big space that’s empty.

So I’m going to try and paste a few things her touched on.

How much of your portfolio should be in gold or silver? What percent of your portfolio should they comprise? And should you buy more of one metal than the other?

These are important questions. Buy too little and they may not make a material difference to your portfolio. Imagine the sick feeling in your gut if, during a crisis, you realize you didn’t buy enough bullion to withstand it (or better, if you had enough gold and silver, to earn a handsome profit from it). Buy too much and your portfolio is negatively impacted if prices go nowhere or fall.

To answer this question effectively, there are some practical guidelines to consider. And since every person’s circumstances are different, this article will help you develop a custom-tailored strategy suitable to your goals and risk tolerance.

What are your goals ?

The starting point is to understand your goals. The following questions might help clarify why you’re buying gold and silver, which is the first step in determining how much to allocate to them.

Are you buying gold and silver… • For a short-term gain, or as a permanent long-term holding? Or maybe both? • • Because they are currently undervalued and you plan to sell when they become overvalued? • As a hedge, because you’re concerned about the potential future downside in the stock market or the economy in general • For collectible purposes, to potentially earn more profit than standard bullion? • Because you want to own a tangible asset and not a paper form of metal? As you ponder your priorities, keep your risk tolerance in mind. The less risk you want, the more gold you want. That’s because it’s been money for thousands of years and never gone to zero. In a worst-case scenario where everything else has gone to zero, gold will be the last line of financial defense for everyone. And be priced accordingly.

Physical gold and silver… • Do not have to please shareholders with quarterly results. Stocks do.
• Carry zero counterparty risk. Most investments do. • Are a store of value, particularly during crises and crashes. Stocks are not. • Have limited supply. Fiat currency has unlimited supply. One of these factors is especially important… consider just how much you trust a corporate or government entity to hold up their end of the bargain in a systemic financial crisis. Then consider how your goals match up with this fact: • Gold and silver in physical form have no counterparty risk. By owning them, you and you alone possess their full value at all times.

How much do you need to make a difference?

You can’t buy one Gold Eagle or one tube of Silver Maple Leafs and expect either to provide much benefit. So how much will make a difference? Here’s some solid, long-term research that can help answer the question…

CPM Group conducted a long-term study into the ideal risk/reward ratio for gold in a portfolio. The research spans 53 years, and includes stocks and bonds.

The research showed that the “sweet spot” for the percentage of gold in portfolio is 20%. On a long-term basis this provides the best balance between risk and reward.

I’ll point out, though, that the current environment may warrant being overweight gold. Trillion-dollar stimulus plans, never-before-seen deficit spending, stock market and real estate bubbles, geopolitical conflicts—the list goes on.

Whatever you decide, the bottom line is that anything less than 5% won’t cut it. If you have 5% in gold and 50% in the S&P, for example, then gold needs to rise 400% if the stock market falls 50% just to break even (assuming gold rises as much as stocks fall). And keep in mind that bear markets actually last a lot longer than many investors realize.

How much do I need to support my expenses?

Another practical way to determine how much bullion you may want is to match it up with your expenses.

What if you someday needed to sell some of your holdings to support your household? Unemployment and high inflation are just a couple reasons one might need to use their bullion to meet their monthly expenses.

This table shows how much gold you’d need on a monthly basis, depending on your expenses and how long you might need it to supplement your finances.

He is using $1,700 gold price and $25 silver price in these charts.

One thing to take into consideration is that you will have to pay taxes on any profit that you make on your precious metals.

Sorry for the lengthy post, but I personally thought it was a nice tool to base a plan on. While I’m not 100% in agreement on everything he has said. I do believe the charts put a realization to why we all stack and what our actual goals should be.

I’d like to hear your thoughts on this, please comment below.