With access to so much information online, it’s easy to get overwhelmed about certain subjects, particularly financial investments. There is a plethora of options available in which people can invest their money that include everything from extremely safe choices with very little risk, to putting money into startups that are popping up all the time. Remember Apple, Microsoft, Intel? Some people who got in early, on those startups made incredible wealth.
The important thing to consider is do we understand the market and how things are connected?
Over the last couple of years, during a time of great financial chaos given a pandemic, and changes initiated by the government, there has been negative growth and negative real interest rates, yet gold has shined. Just today, I attended a meeting with some of the top financial advisors in the industry discussing the last two year’s market performance. Across the board, everything is down except gold and silver. Real estate is speculative right now – but many of the US markets’ top real estate agents are sharing with their buyers and sellers that this is very different time than say a year ago. The days of multiple bids and above asking price may be on halt for the time being.
Regarding real estate, interest rates are a major factor that affect the price of gold.
Normally, when rates go up, the price of gold decreases. The reason for this is because gold and/or silver do not pay interest or dividends, and interest-bearing options look much better. Today the gap between the return on precious metals and the returns in the market has shrunk considerably. What about the connection between real estate and gold?
Precious metals and real estate are both good hedges to inflation risk, and they don’t tend to pace the same. However, for most people to be able to purchase a home, they need to acquire a mortgage. Here is the connection.
When interest rates go up, the borrower’s buying power goes down.
That means fewer home sales, and as mentioned before, higher interest rates usually mean lower prices for gold or silver. If we see a significant decline in home sales due to higher interest rates, gold or silver is impacted. Prices will be attractive. The opportunity to purchase more will be greater. What does all of this mean to the average Joe or Jane?
It's still a guessing game, but because precious metals have pretty much remained a solid investment choice for the last 100 years, just like real estate – homes and land, (minus the housing crisis of 2008,) buying gold or silver today may be a wise investment. It is certainly something to consider, given that if the US dollar falls, having another hard asset will provide some security for many folks. Just having 10%-15% in your portfolio is the standard recommendation from most financial planners.
At MVPL, we provide education through our membership with SOFA, the Society for Financial Awareness. We believe in showing all the options to include risk and benefit analysis, because one size does not fit all.
If you would like to learn more about diversifying your portfolio or just getting started with a solid financial plan, reach out to us at 775-325-4649.
Your initial consultation is free. We do not sell products; we assess and provide you with the education for you to make the decisions that work best for you.