Silver, Gold, Bitcoin: What to Consider When Incorporating Nontraditional Assets into Your Investment Portfolio.
You know about stocks, bonds and mutual funds? But, what about precious metals, cryptocurrencies and other types of nontraditional assets?
Do these asset classes have a place in your investment portfolio, or are they best left alone?
The answer to that question depends on several factors, from your risk tolerance and time horizon to your level of knowledge and investing acumen.
There are lots of things to consider before adding silver, gold, Bitcoin or any other type of nontraditional assets to your investment portfolio.
No matter what asset classes you plan to add to your portfolio, limiting the amount you invest allows you to recuce your risk without sacrificing the upside potential.
So, if you limit your investment in precious metals, cryptocurrencies and other nontraditional assets to 1 percent or 2 percent of your portfolio, you can participate in the upside potential without putting the bulk of your assets at risk.
If you make a smart bid and Bitcoin sky-rockets, you can enjoy a handsome profit. And, if the bottom falls out of the price of gold or silver, your potential loss is limited. You may be tempted to make a big bet on nontraditional assets, but it is best to limit your exposure — and your risk.
Costs of Ownership for Nontraditional Assets
When you buy a stock or a mutual fund, the brokerage firm holds it for you at a very low cost or no cost at all. The cost of investing in a no-load index mutual fund is next to nothing, and discount brokers let you buy stocks for less than $10.
The carrying costs of nontraditional asset classes can be much higher, and it is important to consider those costs before making an investment.
If you purchase Bitcoin or another cryptocurrency, you can expect to pay a commission of several percent.
If you buy physical gold, you will face storage fees, insurance and other costs. These expenses can add up, so it is important to factor them into any potential return.
The Learning Curve
Whether you are investing in stocks, bonds and mutual funds or silver, gold and Bitcoin, it is essential to understand what you own.
The learning curve can be quite steep for nontraditional assets, and even experts have trouble predicting price moves in the short term.
It can be hard to tell which things will influence the price of gold and silver, or which geopolitical factors will influence the value of Bitcoin and other cryptocurrencies.
If you plan to invest in these nontraditional asset classes, it is important to educate yourself and learn as much as possible before jumping in.
Maintaining a well-balanced portfolio is crucial, and for some investors, that means moving beyond stocks, bonds and mutual funds.
If you have been looking for a way to expand your portfolio, investing in nontraditional assets can make a lot of sense.
Even so, it is important to do your homework, limit your risk and be prepared for high levels of volatility going forward.