There are many different assets that you can choose to invest in. Ideally, you will have a mix of stocks, bonds, and commodities such as oil and gold. What are some of the best reasons to invest in gold, and how much should you have in your portfolio?
Gold Will Always Be In Demand
Throughout most of human history, gold has been one of the most sought-after natural resources on the planet. This is partly because of how scarce it is. From an economic perspective, an item is generally worth more when there is less of it. Furthermore, since it is a tangible asset, it will tend to hold its value better than a paper dollar.
Use Gold To Hedge Against Inflation
Over periods of several years or decades, gold increases in value compared to inflation. This is despite the fact that the total return on a gold investment is based on how much it appreciates over time. Unlike savings bonds or other safe-haven government notes, there is no interest or dividends paid on a monthly or quarterly basis. However, when opportunity costs are taken into account, gold provides a greater overall return on investment during times of market volatility.
How Much Gold Should You Have In Your Portfolio?
The amount of gold that you have in your portfolio depends on market conditions, your risk tolerance, and your timeline. If you have 30 years until retirement, it may be best to keep gold to about 10 percent of your portfolio or less. However, if you don’t like investing in stocks or bonds, you can increase that to 20, 30 or even 40 percent. Gold prices tend to rise during times of economic uncertainty, so it may be a good idea to buy more during recessions or other slow periods.
Gain Exposure To Gold In Multiple Ways
You can gain exposure to the gold market in a variety of different ways. First, you can buy gold bars or coins from a local pawn shop or broker. Next, it may be possible to buy gold ETFs or mutual funds. Finally, you can purchase gold options or participate in gold futures markets to hedge a long-term position or to speculate on short-term price swings.
It is not uncommon for financial professionals to encourage investors to have gold in their portfolios. It offers a hedge against inflation and will retain its liquidity because of the popularity of gold in most societies across the world.
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