F. Scott Fitzgerald, one of my favorite authors, once wrote: “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”

Likewise, it’s possible to be bullish about the stock market and at the same time be worried about mounting risks, such as the spread of COVID Delta and the rise of inflation. I’ve been recommending that you stay invested and seek market-beating growth, but you also need to take precautionary steps.

COVID Delta might get under control, but then again, the pandemic horror show in Florida shows that it might not. If you haven’t already, take the following steps to protect your wealth during these booming (but still uncertain) conditions.

1. Keep at least 10% of your portfolio in bonds.

You may be a growth investor and still several years from retirement, but during the current stage of contraction, don’t give short shrift to fixed income. I recommend bond funds, for greater diversification. Notably, short-term bonds are less vulnerable to interest rates than longer-term bonds.

2. Diversify among market valuations.

Spread your portfolio among large-cap, mid-cap and small-cap stocks. One often ignored move is to invest in mid-caps, which provide greater growth potential than large caps but less risk than small caps. A mid-cap is defined as a company with a market capitalization between $2 billion and $10 billion.

3. Seek global diversification.

Don’t withdraw from the world stage and become a parochial investor. To be sure, overseas societies are grappling with COVID Delta just as we are here in America, but the global diversification imperative is intact and applies to all geographic regions and countries.

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An underappreciated investment destination right now is Latin America, which analysts expect to gain traction in the post-COVID era. Europe also is home to blue-chips trading at appealing valuations.

4. Add quality dividend stocks.

Dividend-paying stocks are proven tools for long-term wealth building, but they’re also safe harbors because companies with robust and rising dividends by definition sport the strongest fundamentals. If a company has strong enough cash flow and sufficiently low debt to generate high and growing dividends, it also means that the balance sheet is inherently solid enough to sustain the company through the pandemic.

5. Increase exposure to scarce commodities.

The world is short of vital commodities, such as copper, zinc, lithium, and “rare earth” minerals. When economic growth returns in 2021, these commodities should soar in price. In particular, agricultural assets face multiyear tailwinds, as the globe contends with a looming food crisis.

6. Use stop losses when buying stocks.

One of the most widely used devices for limiting the level of loss from a dropping stock is to place a stop-loss order with your broker. Using this order, the trader will pre-set the value based on the maximum loss the investor is willing to tolerate.

If the last price drops below this fixed value, the stop loss automatically becomes a market order and gets triggered. As soon as the price falls below the stop level, the position is closed at the current market price, which prevents any additional losses.

7. Practice position sizing.

As an adjunct to these rules, always practice “position sizing.” Position sizing refers to the size of a position within a particular portfolio, or the dollar amount that an investor intends to trade.

Position sizing helps you determine how many units of a security you should purchase, which in turn controls risk. As a rule of thumb, risk no more than 2% of your investment capital on any one trade.

8. Make sure your portfolio contains gold.

This step deserves special emphasis. The combination of rising inflation and the persistent pandemic has propelled the price of gold in recent months. Gold probably has further to run, especially as COVID Delta continues to spook the markets.

As of this writing, the price of gold hovers at $1,742 per ounce. The table below shows gold price predictions from various consultancies and independent analysts. Here’s what these gold experts think is ahead for the yellow metal:

Source: HardAssetsAlliance.com

As you can see from the table, the consensus of these analysts is that gold prices will average about $1,900/oz. All are bullish over the long-term.

I’m optimistic about the stock market in the second half of 2021, but conditions remain ripe for an unexpected shock to the global markets. The prospect of another “black swan” underscores the importance of gold’s hedging capabilities.

Gold is a classic crisis hedge because it maintains its intrinsic value despite a government’s ability to back its currency. If your country’s currency implodes, you can still spend physical gold. Gold is universally accepted around the world, without the need to convert it into the local currency. Gold can be bartered anyplace, anytime. And if banks freeze individual accounts during an economic crisis, a physical gold investment can always be accessed.

The rule of thumb is for a portfolio allocation of 5%-10% in hard assets. We especially recommend gold, in the form of gold mining stocks, exchange-traded funds (ETFs), or the physical bullion itself, depending on your risk tolerance and profile as an investor. To learn more about hard asset investing, visit this link.

John Persinos is the editorial director of Investing Daily. Send your questions or comments to mailbag@investingdaily.com. To subscribe to John’s video channel, click here.