I’ve been hammered on these topics in previous articles, but questions about these assets keep coming in. I base my opinion on decades of research and professional sources, as well as my experience in managing other peoples’ money and the great responsibility incumbent in that mission.
Put simply, I am no fan of either precious metals or cryptocurrencies in a portfolio. While they can have their purposes, I believe they are not necessary because other options are more effective, with less risk, at accomplishing your money management objectives.
I’m being very specific in my word choice. By “objectives,” I’m talking about managing a portfolio to accomplish life-necessary purposes – for example, building wealth to retire someday or creating lifetime income as a retiree. When I discuss objectives, I am not considering speculation, get-rich-quick approaches, having fun with one’s portfolio, taking a chance, or predicting the future. You may consider those, and that’s fine. I don’t play with other peoples’ money.
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As a grossly condensed explanation, these assets are based more on emotion and wishful thinking than fundamental financial considerations.
Precious metal prices rise during economic distress because fear is a primary motivator. “Fear buying” drives the value up, and speculators (and the greedy) drive it even higher, generating more media coverage and creating buying frenzy. People who make money in metals are the sellers and the speculators who guessed right in their purchase and sell.
In the meantime, you get no dividends or interest and can’t count on long-term appreciation. Once the greed and fear subside, the metal price comes back to earth and stagnates until the next economic calamity. Long-term investors and people on the wrong side of the trades lose out, again.
Cryptocurrencies have values based on supply and demand. There is no fundamental asset to value the currency against (few exceptions do exist). Fans of crypto talk about the blockchain, limited amounts minted, and the future. That may be fine for you, but when I’m talking to young families who are building their financial lives or retirees sweating whether their assets will last their lifetimes, I can’t gamble with such vagaries. I need assets that can be valued, proven strategies – ones with an expected, measurable track record over long periods.
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Unless you have valuable investment time to waste or money you can afford to lose, precious metals and cryptocurrencies are not appropriate investments for people who need to establish a solid foundation in the financial lives. They distract novice investors from measurable investments and proven strategies – options that can achieve their real-life objectives. These assets are for people who already have solid financial foundations and know their future is secure.
Want to learn more about investment strategies?
- Order or download the MOAA Investor’s Manual (free for Premium and Life members).
- Read Unshakeable: Your Financial Freedom Playbook by Tony Robbins – he interviewed some of the greatest money managers. Consider getting the book via your AmazonSmile account, linked to The MOAA Foundation or the MOAA Scholarship Fund.
- Consider this financial checklist before speculating.