#141: Portfolio Allocation and Diversification
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Today we have Patrick Yip. He's an industry expert Insider. He serves as the Director of Business Development for APMEX. APMEX is one of the largest retailers of physical gold, silver, platinum and palladium, and has sold over $15 billion in product over its 20+ year history. OneGold is a fast growing online precious metals platform that has processed over $750 million in transactions during its first three years in business.
Mr. Yip joined APMEX in 2011 and has held roles in Merchandising, Sales, Project Management and Business Development. He played a key role in the company’s 250%+ growth on marketplaces such as eBay, Amazon and Walmart.
In this episode, we’re discussing…
[1:29] Investing in gold and silver
[4:05] Why is diversification important for your portfolio?
[6:09] What Is Apmex and what is one gold?
[8:31] What is the cost of gold?
[10:59] Self-directed IRA and buying into one gold
[13:36] What makes one gold perform better than its competitors?
[16:07] What is a precious metals rewards credit card?
[19:07] Where do you see precious metals in five years from now?
[21:15] The best way to buy precious metals
[22:50] What is platinum?
Resources from Patrick
+ Read the transcript
Mike Stohler
What if you could be doing something smarter with your money that creates income. Now, if you're wanting to get ahead financially, and enjoy greater freedom of choice, if you want a comfortable retirement, and you know you'll have more choices, if you can do more with your money. Now, if you've wondered who else is creating ways to make their money work for them, and you want actionable ideas, with honest pros and cons, and no fluff. Welcome to the richer geek podcast. Where you here helping people find creative ways to build wealth and financial freedom. I'm Mike Stohler, and in this podcast, you'll hear from others who are already doing these things, and learn how you can too.
Everybody, welcome back to another episode of the richer geek podcast. We have Patrick Yip. Today, he's an industry expert Insider. He serves as the Director of Business Development for APMEX. Is that right? That's correct. And one gold at Mex is one of the largest retailers of physical gold, silver, platinum, palladium. And we're going to talk about a little bit about that. But we're going to concentrate a little bit on one gold, which is some cool apps and things that he has. How're you doing, Patrick?
Patrick Yip
Good. Thanks for having me on, Mike.
Mike Stohler
Absolutely. So let's talk about your into the one gold, you know, the the silver, why are we now still talking about that is Is now the time to do that? Because I'm in the stock market, my God, someone sneezes and who knows what's happening? And?
Patrick Yip
Yeah, I think that, obviously, this year, 2022 is turning out to be a much different year than what we saw in the past 10 plus years, I think a lot of anyone who has invested in the stock market would see that stocks are down, bonds are down, I think I heard a stat that like, I think like in 60, plus percent of the weeks this year, in 2022, the stock Mark was actually down so much different environment to you're seeing inflation at 7.1%, I believe is the latest number 240 plus years high. So what I like to do to obviously, you know, I like to look at history, there's not a one size fits all. But let's see what we can learn from history. And then maybe you can make your own judgments too. So like I mentioned, inflation is at a 40 plus year high. We haven't had inflation since this since probably the 1970s. So if I look back at the 1960s and 70s, we actually had two inflationary and rising interest rate cycles in the 1960s. It took the Fed five years to resolve that inflation. And then fast forward into the 1970s. It took the Fed five years. So where are we today, just last year in 2021. In January, we had inflation at 1.4%. So we're currently about two years into this inflationary cycle. I don't think the Fed has it under control. I mean, you look at it, it's 7.1%. The Fed Funds rates 4.5%. If the Fed really wants to resolve inflation, they need to get it at or over the fed the inflation rate which Volker got it, 500 basis points 505%, above the inflation rate back in the 1980s. And he resolved it. But I don't think the Fed is going to do that. I don't think the Fed has the guts to do that right now. So I always say like, let's let's look at how different assets perform.
So obviously, if you had cash, I wouldn't recommend having a ton of cash. Obviously, cash is good if you want liquidity, if you want buying power. But if you had 7% inflation for five years, assuming it lasts the same thing as in the 1970s, that's gonna wrote about a third of your wealth. And then let's say inflation rent last nine years, it's going to road north of half your wealth. So cash is not an ideal place to look at stocks in the 1960s. In the 1970s, the s&p was flat down, so that stock struggled. And then you look at gold in the 1960s and went up 5x, from 35 to $200, had a little correction in the the mid 1970s. And then in the 1970s, that bull market went from 100 to $850. So if history repeats gold could make a multiple move from where it is right now, obviously, no one knows the future. But that's just what history history says to us.
Mike Stohler
Yeah, and so we have the stock. Well, you know, we always talked about diversifying, you know, you don't take everything out, you don't throw everything and what is it about precious metals? And why would why is it important for your portfolio?
Patrick Yip
So you mentioned diversification, and I like to look back in history too. So like, Well, we did an analysis looking at the past 50 years of data. So we figured that's enough history. So looking back from the early 1970s up till today, and saying what what could gold do to a portfolio? So typically you talk to a financial advisor, they'll say, Hey, if you want a high return high volatility go all in stocks, if you want low return, low volatility will go bonds. I mean, everyone's heard that whole pitch before. So we looked at it too. If you looked at the past 50 years of data and looked at 10 year average returns, so This is not penalizing stocks in 2008, not rewarding gold in 2011. I just want to normalize all that stuff. So if you look at real returns on stocks, that's 7%, annual real return in the last 50 years, and then a standard deviation of 5%. So you know, typically what you'd hear from a financial advisor, you're looking at bonds, 5%, return 3%, standard deviation, so lower return lower standard deviation, if you allocate it, and I'm not saying this is the right allocation for everyone, obviously, do your own due diligence, find out what works best for you. But if you did 80%, s&p 20%, gold, your return over that same period would be 6.7%. So 30 basis points less than that 100% stock portfolio, and a standard deviation of 2.7%. So lower than that 100% bond portfolio, standard deviation, obviously, that's what history says, maybe it repeats, maybe it doesn't maybe that's the right allocation for you. Maybe it isn't obvious, obviously, do your own due diligence.
Mike Stohler And what are some of the different ways that you can own these precious metals? And if you could look at you know, what are the pros and cons of each? I know, there's, like, mutual funds. There's, there's the mining, there's the r&d, there's, I mean, all these different aspects of precious metals.
Patrick Yip
Yeah, so at AmEx and one gold, we have two primary solutions. I'll talk about Amex first. So Amex is one of the largest online retailers of physical precious metals, we sell gold, silver, platinum and palladium to retail investors for physical delivery. We have north of 25,000 products in stock we've done north of 15 billion in sales. But the way you would buy it is basically like any ecommerce site, we we sometimes call ourselves like the Amazon of precious metal. So you go on you look, you shop, you want gold, you want silver, you add it to your cart, you go through the checkout process, you buy it, it gets delivered mail to your house, and then you decide what you want to do with it, whether you want to hide it and save, put it under your mattress, put it in a safety deposit box, that's up to you. Everyone has their own solutions for that. The nice thing about physical precious metals is they're tangible, and they're off the grid, so no one can hack it away from you. It can't disappear. You can pass it on from generation to generation, no one needs to know you exist. It exists to if you ever run into any legal issues, legal problems, no one needs to even know that that's an asset of yours. That's one of the big benefits of physical metals. A lot of times when I do tell people to get in physical metals, they start out with a small sum, maybe a couple of gold coins that have comes 10s of 1000s. And maybe if you're fortunate enough, it becomes a six or seven figure sum and we do have people that spend north of $50 million on Amex. The problem about that is let's say you had a million dollars in gold, probably not the best idea to store a million dollars of gold in your house. All it takes is one guy breaking into your house at 3am. And guess what, your million dollars gone. So what we did two is we created another solution back in 2018. It is called one gold. So as I mentioned back in 2018 at max, which is our parent company partner with Sprott Asset Management, which is a large alternative investment manager with about 22 billion under management to create a modern and intuitive way to buy precious metals. Many people call it like a Robin Hood or coin base of precious metals because it is so easy to use. What one gold does is we have agreements with various vaults around the world such as a Brinks Loomis, Royal Canadian Mint, we then buy a lot of bulk silver, a bulk gold. So imagine like the gold and silver bars you see in movies, the 400 ounce gold bars, 1000 ounce silver bars, we buy a lot of these bars, we stick it in event, we then make it available for customers to buy and sell. And then we won't sell metal that we don't own to. So if you decide to buy more inventory than what we currently have, we actually won't let that sale go through. It's 100% back one for one, it's insured, it's audited. Since you're you are owning basically a part of a larger bar or in some cases, if you have more than than the the 100 or 1400 ounce or 1000 ounce bar, you own the whole bar, we're able to sell it at wholesale pricing. So 80 basis points over spot for gold 2% over silver. And then if you ever want let's say you decided you wanted to get in one gold and you said hey, you know what, this isn't the right thing for me. I actually prefer physical, you can actually swap your gold and silver positions at one gold for any of the 25,000 products available at APMEX. And we'll ship it the next day.
Mike Stohler Wow. I mean, that's, that's pretty amazing. So you have to go to each of the websites or they kind of intermingle
Patrick Yip
again, they're separate companies. If you want to buy the physical you could go to ATM x.com That's a P M e x.com. And if you want to buy the vaulted solution, you could go to one gold.com That's o n e gol d.com.
Mike Stohler And I'd take it there's probably like, you buy it you store it there's like a nominal storage fees, you know, how does that work? Do you set people up on one time purchases? Can they just kind of like auto invest? Hey, I want to spend 500 bucks a month and just keep buying it. You know, how's it work with the
Patrick Yip
Yeah, so So first of all, yes, a few questions there. So in terms of storage fees, we do charge 12 basis points for gold for an annual storage fee billed quarterly and we charge 30 basis points for silver and platinum annually and once again billed quarterly. If you compare that to popular ETFs such as you GLD or SLV, a lot of times they're charging management fees in the 40 or 50 basis points range. So that's basically overtime, you are going to save money with one gold and you have a tangible product, unlike the GLD, where they clearly say it's not insured, which I personally wouldn't touch it, but everyone has their own own reasons to it. That's, that's the first thing. And then the next thing you mentioned, auto invest. So we do have a program, it's called Auto invest, where you could set $1, or ounce amount, and you could set and buy gold or silver or platinum or whatever you want, at regular intervals, whether that's daily, weekly, monthly quarterly. A lot of times we have customers, and I believe it's north of 40% of our orders are auto investigators. So a lot of customers actually log on to this platform, they almost want to make gold part of their savings, almost like a 401 k where your employer may be depositing money into your 401k every two weeks, they said hey, I want to take some of this, this cash that I have and put it into gold, because gold is likely to perform well. So they set a bi weekly auto invest and it just takes it right out of their their checking account.
Mike Stohler
Do you know if it is possible to do like a self directed IRA and then buy into one gold?
Patrick Yip
Yeah, we actually do offer IRAs as well. Just a little bit of background. Obviously, it's not your traditional IRA. Typically what happens with an IRA, you have three parties in a precious metal zone, right you have the dealer which you buy the product from, you have your custodian which manages your your account, then you have your depository, which is where the metal gets gets stored. With one gold, we streamline the process too. So obviously, you still need your custodian, you do need that legal and regulatory oversight. But we've combined the depository and the dealer into one platform through one gold. So basically, to get started, you need to need an arrangement with a custodian. Obviously, that's up to your choice, we do have a page with one gold.com/ira with some of our vetted and trusted custodians, but you need that relationship with your custodian, you would then need to transfer assets from that custodian, you could transfer it into one gold. And then from there, it's all self directed. You could buy sell trade, do whatever you want. And then the nice part about one gold, since you are owning that vaulted position of gold and silver, you could easily trade it as opposed to a physical precious metals IRA, let's say us a Delaware depository. And you're in in Oklahoma like I am, well, guess what, I got to ship the metal over there. And let's say have gold and said you know what, I think I think silver is going to outperform gold next year. So then I got to ship the gold back by silver, ship it back. And like it's it's clunky. It's time consuming. But we've eliminated a lot of that with one gold because you could buy and sell it online.
Mike Stohler And what's great about one gold is it's an app, right? That's probably also a desktop site. But explain kind of like the app process and what you can do on the app. And
Patrick Yip
yeah, so we have desktop, we also have an app to getting started as simple as just downloading the app through that the Google Play Store or the Apple App Store, you put your email address in, you put your name and so on just your normal stuff to create an account, we offer two factor authentication to so like that way, if you have an app, and let's say you lose your phone or something like that, that way, no one could easily just steal your gold or hack into your account. So it is authorized, we do have a facial recognition on there too. From there, it's you're logged onto your dashboard. And then you simply decide whether you want to buy gold, silver or platinum where you want it stored, whether it's in the US, Canada, Switzerland or the UK, you select how much you want to buy. And then you just basically select a payment method. So you can pay by bank wire, you can pay by bank, Ach, you can pay by cheque, credit card Pay Pal or Bitpay, too as well.
Mike Stohler
Even Bitpay so you can buy gold by bit. But I mean, it's it's getting it's a crazy world. What makes one gold, you know, I'm sure there's competitors. You know, tell us a little bit about is it the wholesaling? What makes you one gold perform better or the choice above your competitors? Yeah,
Patrick Yip
so there's a lot of online vaulted platforms. I just look at it too. And there's there's two legacy ones that have been in there for a couple. I mean, I would say north north of a decade. You look at one of these, and they're declining in assets, too. So I would say, you know, first of all, look, look at the growth of your company are people coming in? Are people leaving one gold, we've seen tremendous growth. We started in 2018. We've done north of 900 million in transactions two. So people are onboarding and then a lot of times I look at it too, it's like do your own independent reviews. I mean, obviously a one fold is founded by APMEX founded by Sprott two as well to large companies too. You want to know that, you know, are these companies going to back the product? You know, do they have a credible reputation? And you know, I would say go look independently look, look on Google look, look on you know, your Apple App Store your Google Play Store, see what kind of reviews these these these companies get. But you know, I could say that one gold is founded by some of the largest industry players we are growing. We're always innovating to. Obviously we have a public presence. I would just do your own, do your own due diligence and make sure you know what you're getting into.
Mike Stohler
Is everything that we're buying from American mines? Or is it spread out? I know there's a lot of minerals up in Canada. Where are your assets?
Patrick Yip
Yeah, so we store in the US, Canada, Switzerland and the UK. All these bars are what they call like LBMA approved so they've been approved by the London Bullion Market Association for basically purity, fineness, weight and basically credible manufacture. So like they are, they all are 100% legitimate, you know, not not, you know, some shady refining source, but they also are, they are sourced all over the world. Basically, wherever these refineries are, without camis, one large one in Switzerland, it could be Royal Canadian Mint makes their own bars up in Canada. They're just all over the world, but they are from credible refineries.
Mike Stohler
Now, something that is very unique that you showed, to me, prior to us recording is the bullion card. That's the craziest thing I've ever seen in my life. And you know, one of the craziest, and I've seen some, you know, just because it just blows my mind that you know, this stuff happens. Tell us a little bit about this precious metals rewards credit card.
Patrick Yip
Yeah, this has been a three year in process program. It just launched last just October, just not October, or August, couple of months ago, it's actually this thing on the screen to it's called the bullion card. So it's the first precious metals rewards credit card. So instead of earning cashback or airline miles, you're essentially going to earn gold and silver back so you get 4% back on at maximum one gold purchases 1% back on every other purchase, you get 15,000 bonus points after you spend $1,500, which is basically $150 value. So it's funny I bought my first ounce of of gold using my bullion card and paid well below spot because of this, this 15,000 bonus point promotion. It has no annual fee 0% APR for the first 12 months 0% APR on balance transfers for the first 12 months. So I haven't personally applied for a credit card in probably 15 years. But I did get this thing because I thought it was so cool.
Mike Stohler
Yeah, I mean, that's amazing, everybody, it's who needs you know, airline miles, your your your hotel stays. But my gosh, I mean, this is actually an asset that is going to could lead to, you know, some generational wealthy or a piece of it by getting precious metals back via rewards. That is just the craziest thing. And where can they find that bullion card if there yeah, there's
Patrick Yip
actually two variations available. So if you'd like physical metal, so you can apply an ATM x.com You can look at that as the Bullion card.at max.com. And basically your points will be like a gift card balance that gets put into your Amex account, you could choose to redeem it whenever you want, on whatever products you want. And then the option I preferred is actually the one gold option, you could find that card on the bullion card dot one gold.com. And the way the one gold card works is because we're selling you basically a part of a 400 ounce gold bar or 1000 ounce silver bar, I don't need to actually sell you the coins, I could allocate metal in point 001 increments. I basically set up to select my asset, if I want gold, I want silver, I want platinum wherever I want it stored, and it's a set and forget plan. So if I go to Costco, I spent 100 bucks over there, I'm gonna get real gold deposited into my one gold account, which is kind of neat. It's basically it does it automatically for you.
Mike Stohler
Yeah, and that is just absolutely amazing. And, you know, for us entrepreneurs, for us, people that love to invest. I mean, that's just a dream come true. It's like my gosh, I actually get something tangible. Even though you can kind of monetary calculate hotel stays and things like that, but getting actual precious metals. For spending my everyday purchases, you know, everybody, please, you know, check that out. That is just I've just blown mind is blown. Where are you see precious metals? Five years from now in the trends? Are you seeing anything in a slowdown? Or is this just blowing up because of the inflation and
Patrick Yip
so if I look back to 2019, that was probably our last normal year before all this pandemic mess. We did about a billion dollars in sales. Had a decent amount of customers. You look at 2020 Obviously we had that that COVID crash and March where everything sold off. Silver went down to about $12. Gold went down I think about 14 $1,500 basically after that people started running into the metals. And if you look at it now, we're seeing customers that more than double the levels we've seen in 2019 sales at well more than double. We did 2 billion of sales last year were north of 2 billion of sales and these are retail customers buying two but this these are not wholesale deal. So these are people like you and I that are saying, Hey, want to protect my assets? Let's let's get some gold and then they get gold. So we're doing quite a bit. I think a lot of people are seeing the writing on the wall they're seeing inflation is here. They're saying if history's gonna repeat, gold's likely to do well, and in addition, I know we talked a little bit before the call, I think a lot of things are cyclical to you look at like, let's look at 2000. And onward, you had 2000 to 2011 ish, you had like the last decade in stocks, stocks basically didn't go anywhere for 10 plus years. Gold on the other hand, during that, that 2000 to 2011, period went from 250 to $1,900. And then fast forward, you look at 2011 to 2022, gold basically didn't do much went from 1900, down to 1050. Now it's around 18. And change, basically, you know, gold was not the asset to hold in 2011 to 2022. Stocks, in the other hand, what Forex 1250 to 4800, amazing Bull Run and stocks up till 2022. I think anyone who's followed stocks this year is seeing that stocks are starting to correct. We're nowhere near that 4800 level. I think it's only a matter of time before this cycle, reverse, nothing goes up forever, nothing goes down forever. Everything kind of runs its course. And I think I would not be honestly surprised to see stocks have another Lost Decade just after that fourfold move up to 4800.
Mike Stohler
Yeah, and yeah, I do think that this is the way to do to buy and get into precious metals, you know, I had, man, if I could find this guy, I had a financial planner. And I wanted to spend 10s of 1000s of dollars in actual gold. And of course, he's a financial planner, he didn't get a cut on actual gold he. So he talked me into funds, and stocks that he got a kickback. And if you can believe that gold was just below 500 An ounce when I was going to do that. And oh, if I could find that guy. Now.
Patrick Yip
Unfortunately, you have a lot of these financial advisors and I personally like the guys that I have. And obviously this back in 2008, two, I got pretty burned back then too, I had your 10 We will pop portfolio of stocks and bonds. And I just wrote it all the way down, rode the s&p down all the way to 666, I believe is the number back in 2008 and got burned pretty badly. But you know, I would say a lot of times too, it's like, you know, there are good people out there and good financial advisors, but the person who's going to look after your money, the best is going to be you. So like I would say do your own, do your own due diligence, do your own research. Maybe you trust me, maybe you don't. But you know, it's just like, do your own research and find out what the best allocation is for you.
Mike Stohler Now you talked about you know, gold, silver, platinum palladium, for those. Everyone knows golden silver, what is platinum.
Patrick Yip
So platinum and palladium. They're largely industrial metals, they're used as a catalyst for like catalytic converters to get rid of some of the pollution in autos and trucks. I would say if you're looking to precious metals, start with gold and silver just as a just for some data about 70% of the dollars we sell our gold. So we sell a lot of gold, a lot of people looking for that, that inflation hedge that portfolio diversification tool. The other 20 Some percent are silver. So these are the people looking for precious metals, but a lot of times people look at Silver as being the higher beta or higher volatility gold. So if if silver went up by or if gold went up by 1%, silver might go up by 2%. The same thing if gold went down 1% Silver might go down 2%. So they're looking for that higher volatility play. And then I would say about like one to 2% of our sales dollars goes into platinum and palladium. Like I said, they're largely industrial metals, I would say you could get into it. But as if you're just getting started with the precious precious metals, I would say definitely start with gold and silver.
Mike Stohler
Well, everybody, you know, we've learned a lot. Two companies APMEX AP me x and one gold. Patrick, where can people find you? If they have questions?
Patrick Yip
Yeah, if you have any questions, feel free to reach out to me directly. I'm at patrick.yep@mx.com. That's P A T R I C K. Dot. Yep. yp at APMEX APM edx.com.
Mike Stohler
Sounds great. Patrick, thank you so much for coming on the richer gig and the coolest credit card I've ever seen in my entire life, and an app where you can buy gold and silver and other precious metals. Thank you so much.
Patrick Yip
Right. Thanks, Mike.
Mike Stohler
Thanks for tuning in to the richer geek podcast, where we're helping others find creative ways to build wealth and financial freedom. For today's show notes, including all the links and resources from our show, and more information about our guests, visit us at: www.therichergeek.com/podcasts Don't forget to jump over to Apple podcasts, Google Play Stitcher, or wherever you get your podcasts and hit the subscribe button. Share with others who can benefit from listening and leave a rating and review to get the podcast in front of your eyes. I appreciate you and thanks for listening.
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ABOUT PATRICK YIP
Since 2011, Patrick has been using his background as a finance and investment advisor, empowering clients to make wise investment choices in the precious metal industry. With inflation rates at a 40-year high, many are hesitant to take the risk. As an industry expert, Patrick dives into what history can teach us about the current situation, the pros and cons involved, and why precious metals are still a viable investment opportunity that should be considered.
Patrick Yip serves as the Director of Business Development at APMEX and OneGold. APMEX is one of the largest retailers of physical gold, silver, platinum and palladium, and has sold over $15 billion in product over its 20+ year history. OneGold is a fastgrowin g online precious metals platform that has processed over $750 million in transactions during its first three years inbusiness.