Gold, silver and platinum have outperformed several major widely accepted investment indexes over the last 10 years, yet many portfolios ignore this asset category, says a report from Catalyst Equity Research Inc.

“The traditional view of portfolio management is that three asset classes—stocks, bonds and cash—are sufficient to achieve diversification. This traditional view is quite simply incorrect, and it has cost investors and pensioners dearly over the last decade alone,” says Robin Cornwell, the founder and principal shareholder of Catalyst. “Post-modern, efficient frontier portfolios are optimal in both the sense that they offer maximum expected return for some given level of risk and minimal risk for some given level of expected return. Typically, portfolios that comprise the efficient frontier are the ones most highly diversified.”

Many investment professionals do not recognize precious metals as an asset class, says the report. However, a physical allocation in precious metals provides an investment with no counterparty risk, sufficient liquidity for large investors and no dependence on management for performance—making them a useful diversification tool.

Today, only 0.3% of pension fund holdings are in gold; half of that amount is invested in gold mining stocks, not physical bullion.

The report also states that bullion provides insurance against failure of all other investments, offers improved liquidity and is the only asset class (excluding cash) with a positive correlation coefficient with inflation.

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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