For centuries, gold has been the preferred way of accumulating and securing wealth—and with good reason. Unlike other investment instruments, gold is a relatively low-risk investment option, as it predictably appreciates in value over time.
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If you are looking to diversify your portfolio to spread the risk of your investments, then it is worthwhile considering investing some of your funds in defensive assets. Defensive assets are an investment strategy that may be low to medium risk, and to some extent, they may be able to offset the higher-risk asset classes in your portfolio. With Rush Gold, you can take the first steps towards investing in defensive assets as you can buy gold easily online.
What is a defensive asset?
When talking about investing, there are a number of different asset classes. Some of the main asset classes include equities (stocks), fixed-income and debt (bonds), money market and cash equivalents and real estate and tangible assets, including gold. Real estate and property investment and other tangible assets are considered to be assets that may generally be resistant to periods of inflation.
Some tangible assets, such as gold, are also considered to be defensive assets. Defensive assets tend to be more safe investments, and they are often considered to have lower volatility, which means they are usually more stable and tend to have steadier returns overall. Generally speaking, this kind of asset may have a lower risk as well but may also yield lower returns over longer terms, especially when compared to investments that are at higher risk. They are often used to meet short-term financial goals. Some other examples of defensive assets include cash, debentures, bonds, bank bills and bank deposits. On the other hand, aggressive stocks tend to experience rapid growth and may potentially produce higher returns, but equally may also produce bigger losses.
Gold is considered part of the group of defensive assets for a number of reasons. It is seen as a way to potentially hedge against inflation, for example. Overall, gold has a tendency to hold its value well when there is a downturn in the market. What this means is that while the market may fall, the price of gold may not. If an investor chooses to buy gold bars, gold in its physical form is also zero credit risk, meaning that it has no default risk. This rating of its risk-weighting at zero occurred in April 2019. While it is a commodity, it often behaves differently to the equities market, whereas other commodities are often tied to the rise and fall of the equities market. This means it may serve as a sort of insurance against the risk of other commodities or the equity-based part of an investment portfolio.
Is it worth investing in a defensive asset?
How you work your portfolio depends on how much risk you are prepared to take. It has been suggested that younger investors be more aggressive as they have time to counterbalance risks and ride the market wave, whereas older investors may not have the time to come back after a market downfall, so they may prefer an investment strategy that leans towards more conservative investments.
However, overall, portfolio diversification is really important, including defensive assets. As a defensive asset, gold can be considered a secure investment, even in comparison to ETFs. This is because gold investing may provide systemic risk protection. Systemic risk is the risk associated with the collapse of an entire system. In this case, it would be the collapse of an entire financial system or market. Systemic risk cannot be prevented, but it can be managed through diversification as each different type of the asset classes will respond differently to different types of change. Therefore, if you don’t put all your eggs in one basket, you are more likely to hold an investment portfolio with the ability to withstand systemic risk. This is particularly pertinent in relation to deciding on the best SMSF investments. As a variety of assets are able to be held, careful asset allocation is key to an optimum risk and return scenario.
How to invest in a defensive asset?
It may have seemed tricky to invest in defensive assets such as gold in the past and to work with brokers and storage facilities for your defensive investments. In fact, potential investors may not have known where to buy gold or how to buy gold in Australia. However, with Rush Gold, buying and trading gold has become easy. To invest in gold with Rush Gold, you just need to download our app, which allows you to create your account within minutes. There is no paperwork and no minimum purchase.
Once you have an account, you can purchase gold digitally. However, you are actually purchasing the title for real gold, which is stored in a highly secured Australian vault and insured by Lloyd’s of London. Using the Rush Gold app, you can manage your gold with your mobile phone anywhere and anytime. You can use your phone to track your gold’s performance and use it just like cash. This means you can send gold via the Rush Gold app to recipients who are residents of any of the countries where Rush Gold is live. Furthermore, there are no local fees. Finally, with the Rush Mastercard, you can use gold as a currency in real-time globally.
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