Gold and silver belong in your portfolio. You may not be able to take out an insurance policy on your life savings, but you can invest in gold and silver. Gold and silver prices rise and fall against the ups and downs of the stock market, which is where most investors tend to put most of their money. There are a few ways you can leverage this negative relationship.

Modern Portfolio Theory

The best way to understand why bullion is increasingly necessary in your portfolio is to start with modern portfolio theory, an approach to investing that emphasizes diversifying to match your risk tolerance, and recognizing that there are multiple types of investment risk.

For example, someone who invests in only two or three companies’ shares is incredibly vulnerable if even one of those companies suffers a bad year or goes bankrupt. Even a portfolio that is 100% invested in index mutual funds (designed to match the performance of the index) will experience considerable losses during a widespread market correction.

However, investors who pick traditionally safe, low-interest investments like long-term treasury bonds face other risks. Their principal is safe, but they run the risk of losing purchasing power to inflation or not growing their savings sufficiently to meet their goals.

Modern portfolio theory uses multiple investment vehicles to reach your goals.

Asset Allocation

Your risk tolerance will determine asset allocation. A modern portfolio embraces many forms of investment vehicles, and your “basket of assets” can include shares, bonds, cash, real estate, gold and silver, as well as rarer assets such as fine art or cryptocurrencies.

Allocating for Gold and Silver

About 5-10% of your portfolio in gold or silver seems to be the magic number. Aside from an emergency fund kept in whatever currency you use every day (unless that currency is experiencing high inflation, in which case you should opt for a safe haven like the US dollar, Euro, or Japanese yen), you should always put precious metals higher in priority than large cash savings. These will lose value to inflation and there are serious concerns about the long-term effects of quantitative easing on US monetary stability.

Gold and silver are superior to cash because of the way their prices work. Take a look at the latest silver price and compare it to silver prices in 2000. Then compare the value of $100 USD and see how much it’s worth today.

Silver prices have grown from an average of $4.95 an ounce in 2000 to nearly $15 an ounce today. As of 2018, inflation over the same period amounts to a cumulative change of 45.82%. Given how little interest banks pay on ordinary savings accounts, you need another option.

Gold and silver can fill that role.

Gold vs. Real Estate

Some may encourage you to invest in real estate before precious metals. That may make sense for some, but by retirement age, most people are vastly overexposed to real estate. The single biggest investment most people make in their lives is real estate. If you’re not considering your house to be part of your portfolio, you’re thinking about its financial potential wrong.

Rather than overexpose yourself, diversify those alternatives assets and try owning real gold and silver bullion. It will change the way you see financial security.