In the current volatile and uncertain investing environment, the investment community is looking to add hard assets to their portfolio. These investments, which include tangible items like gold coins, fine wine, and investing in shipping containers, have proven they can retain their value; even during times of economic and political turmoil. This appeals to investors, especially those who are concern about the effects of war on their investments, and the current state of the global economy.
To the surprise of many, during the global financial crisis in 2008 and 2009, hard asset investments outperformed popular stocks and bonds. This is because in most instances, the performance of hard assets is not affected by the decline of traditional investments, and thus are able to offset any portfolio losses. It is this resilience that makes including this asset such a good idea.
Financial advisers have long recommended that diversifying your portfolio holdings is a great way to avoid a worse case scenario. Adding investments that act independently of equities and bonds ensures that in the event of a “crash” or inflation, investors can rely upon a different class of investments to deliver strong, steady returns. This is particularly important for an investor who relies upon dividends and interest payments to supplement a retirement income.
A hard asset investment is generally a long-term commitment; usually upwards of 10 years. During that time, they provide strength to an investment portfolio by reducing exposure to risk, and by delivering profits to investors during times of uncertainty. From an investor’s perspective, especially one who has experienced adversity in the markets, these are two very appealing characteristics.
Most members of the investment community are not in a financial position to wager their money on high-risk investments, like risky bonds and the stock market. The approach adopted by many is one that avoids excessive risk, now and in the future. The introduction of hard assets works to shield an investment portfolio from unexpected exposure to risk.
Whether it be an investment in gold, shipping containers, or fine wine investments, hard assets should be part of an investor’s long-term investing strategy. Limiting exposure to volatile assets will better protect one’s principle and help achieve investing goals in a timely manner. Without including them, investors run the risk of overexposure to traditional assets that could be financially devastating if a “crash” were to occur.