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In the current economic climate, where inflation and interest rates have risen, many investors are taking a closer look at their portfolios.
While you don’t necessarily want to react out of fear or try to time the market, you can revisit your portfolio to see if your investment strategy fits your current needs. Perhaps you are under-diversifying, or your risk tolerance has changed. In such a situation, you may turn more towards assets like gold.
“Perhaps the primary reason someone would consider investing in gold is for added diversification. Gold has a low correlation with other asset classes like stocks and bonds, which means it’s not compatible with these other traditional investments,” said Tyson Romanik, chartered financial analyst at Baker Boyer. VP Portfolio Manager.
Another reason to invest in gold is to have an asset that can potentially hold up amid greater volatility, with many investors using gold as a store of value. That being said, there is no guarantee that gold will perform well in a tough economic environment, and investors should understand the potential rewards as well as the risks of investing in gold.
To learn more about investing in gold, start by requesting a free information kit to learn more.
Gold investment tips for beginners
If you are new Investing in goldConsider the following tips:
Limit your precious metals investment to 5%-10% of your overall portfolio
A general rule of thumb is to limit yours Investment in gold and/or other precious metals 5%-10% of your total portfolio. Investors may differ in terms of what the mix of precious metals looks like, but gold is often a significant component.
“Gold should be part of a diversified portfolio, not the whole thing,” says Taylor Kovar, certified financial planner, The Money Couple and CEO of Kovar Wealth Management. “As for the 5%-10% rule of thumb, I almost always steer people toward a mix of silver and gold. Both have a lot of uses, for whatever reason someone wants to invest in precious metals—diversification, economic downturns, inflation. Hedging—and getting that and Easy to do business,” Kovar adds.
Learn more about investing in gold by requesting a free investor kit here.
Do your research
To get the most out of gold investments, take the time to research this asset class.
“Like any other investment, you shouldn’t invest in gold without doing your homework,” says Kovar He recommends learning about the factors that affect the price of gold, “and then slowly building it into your portfolio.”
Remember, market timing can be complicated and is often not recommended for the average investor. But a better understanding of how gold works as an investment can impact your asset allocation and your ability to stick to your strategy.
“The best way to start would be to learn more about the significance of gold and other precious metals within the broader market landscape,” said Orta Trepka, basic materials sector analyst at Nasdaq IR Intelligence. “Precious metals are one of the oldest asset classes in history and gold is seen as a store of value or safe haven during turbulent times such as geopolitical uncertainty, economic downturns or pandemics.”
It’s also important to understand why gold doesn’t always perform as well as it might think.
“Gold is regarded as a hedge against inflation but that business strategy becomes complicated in an environment where interest rates remain high, which increases an investor’s opportunity cost of holding non-yielding assets like gold,” Trepca added.
Compare different ways to own gold
Part of doing your research means looking in different ways own gold Or gain exposure in this category.
“There are many ways to invest in gold, depending on your risk tolerance and preferences, but my favorite is to buy physical gold bullion,” says Kovar. “It’s a great conversation starter, fun to have on hand, and a hedge against an economic downturn if you’re investing. , you can actually access it.”
However, owning gold bars or coins can come at a cost.
Gold investors should “research the implications of such an investment because most methods of buying gold bullion require consideration of associated costs such as premiums and storage fees,” says Trepka.
an investment ETFs Or a mutual fund that owns physical gold could be an alternative to owning it, he adds. Similarly, a fund may provide exposure to the gold mining industry.
“Investors can also choose to buy shares of a particular gold producer if they are interested in exposure to a particular gold project or mine. Another option is to invest in gold royalty companies that pay producers for the right to a percentage of revenue or production,” Trepka said.
Clarify your goals
New investors in gold They should also make sure to clarify their goals for investing in gold. This can affect how much of your portfolio you decide to allocate, for example, if you want to lean more towards 5% to 10% to begin with.
“If they’re looking for additional diversification or preservation of assets, it might make sense to add a reasonable amount,” says Romanik. “If it’s more to speculate or chase short-term performance, they may want to reconsider. Gold can be a volatile asset so one needs to understand the risks of holding it.”
Your goals can also influence the format of how you invest in gold. If you want peace of mind during tough economic times, for example, you may be more inclined to acquire gold bullion.
“Gold is a tangible asset that you can physically hold. Some investors like it because it provides a sense of security and ownership,” says Romanik.
Bottom line
overall, Investment in gold Doesn’t have to be overly complicated, but beginners should take time to understand the asset and consider different ways to invest in gold. Focusing on what you want to achieve can drive your decisions.
“To determine whether gold fits your portfolio, consider your risk tolerance, investment goals and time frame,” says Kovar. “If you want diversification, stability in volatile markets or protection against inflation, gold can be a suitable addition.”
In many cases, talking to a financial advisor can help you make this determination, but you can also take time to review your own situation. “The best way is to talk to their financial advisor and see if it fits with their personal investment objectives and overall financial plan. If they don’t have a financial advisor, they might want to ask themselves why they’re even considering it in the first place.” ,” Romanick said.
Learn more about your gold investment options here now.
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