Portfolio Diversification: The key to diversification is finding investments that are not closely correlated to one another; gold has historically had a negative correlation to stocks and other financial instruments. Recent history bears this out:
- The 1970s was great for gold, but terrible for stocks.
- The 1980s and 1990s were wonderful for stocks, but horrible for gold.
- As of 2008, this decade has been a good one for gold, and an unfavorable one for stocks.
Properly diversified investors combine gold with stocks and bonds in a portfolio to reduce the overall volatility and risk.
- The 1970s was great for gold, but terrible for stocks.
- The 1980s and 1990s were wonderful for stocks, but horrible for gold.
- As of 2008, this decade has been a good one for gold, and an unfavorable one for stocks.
Properly diversified investors combine gold with stocks and bonds in a portfolio to reduce the overall volatility and risk.
Source: http://www.investopedia.com/articles/basics/08/reasons-to-own-gold.asp; http://www.investinganswers.citymaker.com/Investing_Answers.html
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