Four Store of Value Investments for Asset Diversification

In today's capitalist economy, it's crucial to possess assets that can maintain their value and provide stability; ideally, investing in items with a good store of value. The term "store of value" refers to goods that can maintain or increase their value over time instead of losing it, offering a means to preserve their wealth. Individuals with a lower risk tolerance typically prefer investing in assets with a long lifespan, stable demand, and low volatility. 

Diversification is a strategy for managing risk that involves creating a mix of various investments within a portfolio. A diversified portfolio includes multiple asset types and investment vehicles to minimise exposure to any asset or risk. 

Here is a guide to four items that have historically demonstrated a high store of value or are predicted to grow in the future, along with their benefits and risks, so you can diversify your portfolio to reduce the loss of risk of your assets. 

1.   Bitcoin

Despite its volatility and limited utility as a medium of exchange, Bitcoin has emerged as a potential store of value in the cryptocurrency space. Its decentralised nature, digital scarcity, and global accessibility make it an appealing option for those seeking alternatives to traditional assets. With Bitcoin's ever-growing value, you can use Bitcoin buy and sell strategies to increase your return on investment. 

One key aspect to consider is Bitcoin's durability as a digital asset immune to physical wear and tear. Its existence is tied to the continued operation of the decentralised network supporting it, suggesting a potentially durable store of value. Its digital nature also means you do not incur any transport costs.

Additionally, Bitcoin's fungibility and divisibility make each unit interchangeable with any other unit and highly divisible down to tiny fractions known as satoshis, enhancing its usability as a store of value.

Bitcoin's scarcity is also crucial, with a fixed supply capped at 21 million coins, ensuring its value can be appreciated over time. Its transactions are verifiable and recorded on a public blockchain, adding credibility. Despite these strengths, Bitcoin's history as a store of value is relatively short compared to assets like gold, which has been a store of value for thousands of years.

2.   Precious Metals 

Precious metals such as gold, palladium, and platinum have historically served as reliable stores of value due to their enduring nature and industrial applications. Their scarcity contributes to their value appreciating relative to fiat currencies. 

Storing significant amounts of physical gold can be costly and logistically challenging. Consequently, investors often opt for digital gold or stocks with counterparty risks. Gemstones like diamonds and sapphires also hold value and offer advantages in terms of storage and transportation.

3.   Real Estate 

Real estate stands out as a prevalent store of value because of its tangible nature and practicality. Despite occasional setbacks, it's seen as a stable investment, offering security to owners of physical land or properties.

Real estate encompasses various physical assets such as land or residential and commercial properties, which can serve as primary residences, vacation homes, or rental units. However, its drawback lies in its need for more liquidity and vulnerability to government regulations or legal proceedings. This can pose challenges for property owners needing swift access to funds and expose them to external intervention or legal constraints.

4.   Fiat Currency 

Governments issue and regulate fiat currencies, and their value stability is pivotal to being recognized as a store of value assets. While some fiat currencies can be volatile and prone to inflation, some stable options are present that investors view as reliable as stores of value. Some of the commonly acknowledged stable fiat currencies include:

●      US Dollar: As the primary reserve currency worldwide, the US Dollar is crucial in finance and international trade. Its global reserve status, supported by the USA's economic power, contributes to its stability and widespread acceptance. Investors often seek the US dollar as a safe asset during uncertain times.

●      Swiss Franc: Popular for its stability, it is considered a haven currency. Switzerland's commitment to sound monetary policies, financial stability, and robust financial sector underpin the Swiss Franc's reputation as a store of value. Many investors view it as a reliable option for preserving wealth.

●      Japanese Yen: One of the other popular stable fiat currencies, the Japanese Yen is sought after for its store of value characteristics. Japan is among the biggest economies globally, and its stable financial system and low inflation rates contribute to the stability of the Japanese Yen. It is actively exchanged in the worldwide foreign exchange market and is seen as a safe-haven currency.

Endnote

In today's economy, asset diversification is crucial. Four valuable investment options include Bitcoin, known for its decentralised nature and potential durability; precious metals like gold, palladium, and platinum due to their scarcity; real estate for its stability; and stable fiat currencies like the US Dollar, Swiss Franc, and Japanese Yen, valued for their stability and widespread acceptance.