Many market gurus suggest that the strongest portfolios are those that are the most diversified. Broadening your investing horizon – whether it be in stocks, bonds, cash, etc. – always helps to ensure that your portfolio has a steady rate of growth while at the same time minimizing your potential losses. One often overlooked type of investment is precious metals. These metals, consisting of silver, gold, platinum, amongst a couple of others, are vital in protecting your portfolio from the inherent dangers of recessions. While most people choose to add gold bars to their investments, we suggest adding gold bullion coins instead.

The primary reason for adding coins in lieu of bullion bars is the added collectors’ value that gold bullion coins bring. For example, the Australian gold nugget has a design that changes annually and is manufactured to the same 99.9% pure specifications to which other coins (such as the American Eagle) are subjected.

This, combined with the fact that a limited number are minted per year helps this particular coin to have a value that can easily rise above that of its base “metal” value. To this effect, adding rare or limited edition coins to your portfolio helps ensure that, even in the case of a gold price fallout, the price of the coins will hold their value better than generic gold bars.

Secondly, adding gold coins helps to provide downside protection in both directions. Most gold coins have a nominal face value. For example, a gold bullion coin containing 1 oz. of gold may sell for ,000, or twice the value of the gold inside the coin. Yet, that same coin may have a face value of 0. In the unlikely event that gold crashes to 0 per oz., the face value of your gold bullion coins will still give you 0.

Conversely, in the event that gold skyrockets to ,000 per oz. (as a side note, this would likely be the byproduct of hyperinflation), the coin would be worth ,000. As one can see, gold bars only provide the latter potential, while gold coins also provide protection against another potential “what-if” scenario.

However, it’s important to note that many countries have regulations on what precious metals can be stored in retirement programs and other accounts, so it’s very important that you check with your government regarding the sale and possession of precious metals. For example, should you choose to have a self directed IRA in the U.S., you can only add gold bullion coins that meet the 99.9% fineness requirement. That means that the South African Krugerrand, which is not 99.9% pure, would not be allowed in your IRA.

All in all, it’s not too hard to see why investing in gold coins is definitely a smart idea. They provide downside protection and a strong element of diversification. Plus, gold is always in demand, so even if the entire banking system were to collapse, you’d still be able to get the essentials (if money were worthless, who wouldn’t accept gold instead?).