Precious Metal Portfolio Diversification

The Auctus Metal Portfolios team strongly advocates a balanced approach to investing in precious metals. Typically a precious metals investor will only invest in one individual precious metal; i.e. Gold and then leave it in a vault to collect dust and hopefully appreciate in value over time. This approach will likely only yield the investor with a moderate return over time, though it does provide the investor with an ‘insurance policy’ insofar as it serves as a hedge against unforeseen, negative macroeconomic events.

This is not however, the approach an investor would normally take when investing across mainstream assets. Investors would prudently spread risk among a basket of shares for example, or other such investment alternatives, and would then re-weight their holdings periodically according to their individual market performance; thus taking advantage of price swings. Unsurprisingly, this tried and tested methodology for investing using diversification and an active management approach, should therefore apply when investing in precious metals.

We realized that investors’ returns are consistently and substantially enhanced when a portfolio is optimally diversified across a basket of precious metals. The key to the selection of these precious metals are twofold: i) they must be transparently priced across world markets and ii) sufficiently liquid to be easily traded when investors wish to either buy or sell the precious metal in question. We have applied extensive research to the 5 following precious metals that fit this criteria while continuing to ensure ownership of uncorrelated assets. These precious metals, in order of liquidity are Gold, Silver, Platinum, Palladium and Rhodium.

Whilst these precious metals all function in different ways and their prices are driven by differing fundamentals, we understood that we could build a diversified investment portfolio, carefully balanced across these metals, to both protect our clients from downside risk and take advantage of market opportunities signalled by our proprietary algorithms. We developed highly complex algorithms that process in excess of 55 variables, that analyse precisely what drives each of their individual spot prices which then enables us to actively manage them for our clients.

By using over 50 years worth of precious metals pricing data, we have proved that with a carefully weighted basket of metals, investors can generate substantial compound growth from their physical precious metals investments (with no paper trading, no collateralization or any leverage whatsoever) in both bull markets and bear markets and can also protect them from violent price movements in one of the individual precious metals aforementioned, by spreading their risk over a diversified portfolio of metals.

By correctly diversifying and occasionally re-weighting our clients’ metal holdings, we are achieving exceptional returns whilst concurrently serving as an essential hedge against negative global macroeconomic and systemic risks.

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