STUTTGART, GERMANY – 19 Nov, 2016 – Expert Harald Seiz of Karatbars knows inflation and changes in the exchange rates for various kinds of currencies can have an effect on an individual’s net worth, financial security and retirement. Here are some things to remember about investment commodities and why you should consider it as part of your investments and financial strategy. Most investors have never experienced a true currency crisis. The complexities of finance are usually left up to their professional advisors and the occasional look at a book or video about how markets or investments work.
The purpose of a diversified portfolio is to minimize risk. There is no such thing as a perfectly safe investment, so it is necessary to “hedge” risk in one by matching it with another. The reason gold is popular is because it acts as a store of value that often offsets the effects of inflation when its value is measured against other types of investment vehicles. This effect is called a hedge because it minimizes the consequences of an underperforming investment.
The Problem With Currency
The value of money is never more or less than what an economy’s participants say it is. One need only look at the purchasing power of a dollar from 1955 and compare it to the purchasing power of a dollar from 2015 to see the value has changed, and quite dramatically. Investors like Harald Seiz of Karatbars will tell you if your investment strategy is to accumulate currency, then the value of your investment may drop dramatically depending on how the value of that currency changes over time. While this isn’t necessarily a crisis for the larger economy, it can most definitely be a crisis for you.
The hedging benefits of a commodity investment are related to the potential weakness in a currency based investment strategy. Because the value of precious metals are more stable than the value of a currency alone, the currency equivalence of a given quantity of them naturally increases if the value of that currency decreases. This means gold and other commodities like it are a natural hedge against inflation. They perfectly offset, and in some cases improve on any potential loss of value when currency markets fluctuate.
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