Investors and advisors need to include gold bullion in investment portfolios, according to a Nick Barisheff, president and CEO of Bullion Management Group Inc. in Markham, Ont., to ensure wealth preservation and a properly diversified portfolio.

In fact, Barisheff has written a book on that exact topic. Entitled $10,000 Gold: Why Gold’s Inevitable Rise is the Investor’s Safe Haven, the book is meant to offer readers a better understanding of gold and its role in diversifying a portfolio.

“I [wrote] a book to insist investors and advisors get a better fundamental understanding of why gold should be included literally in every portfolio,” says Barisheff. “There isn’t anybody that shouldn’t have bullion as part of an allocation [strategy].”

Traditionally, advisors focus on cash, stocks and bonds to diversify a portfolio, says Barisheff. However as these investments become more correlated, Barisheff argues that advisors need to look at using at least six out of seven available asset classes, which include cash, stocks, bonds, commodities, real estate and precious metals. The seventh asset class, collectibles, requires a high level of knowledge and expertise and so Barisheff suggests leaving it out of investment portfolios.

In terms of what portion of a portfolio should be devoted to gold, Barisheff suggests 10% as a starting point. Barisheff himself is 100% invested in precious metals. More specifically, Barisheff stresses that advisors should purchase physical gold for clients rather than mutual funds, exchange-traded funds or mining stocks.

“People have the impression that mining stocks outperform bullion and they did in the early part from 2002 to 2006,” he says, “but since 2006 they haven’t.”

Even with the recent drop in gold prices, Barisheff still believes that gold belongs in every investment portfolio. Barisheff says the recent price fluctuation was just a “natural process of things” and was in large part caused by the paper-based markets.

“There was no fundamental reason for the gold price to drop,” he says. “And for the first time that I can recall, the demand for physical [gold] literally exploded because people who are aware of the benefits of gold saw this as a terrific opportunity where the gold price was being handed to them at a discount.”