People have diverse reasons for including an investment instrument in their portfolio, whether stocks, precious metals like gold, bonds, or any other investment vehicles.
Investment goals influence decision making because what Investor A finds attractive might not be appealing to Investor B. It’s important to note that risk appetite and perception of an inherent risk differ from person to person.
Gold is consider one of the precious metals, which are recognized by their rareness. Gold, silver, platinum and palladium are all considered precious metals, but gold seems to be the most well established and has great value due to its sentimental and historical value, as well as its role as a primary monetary reserve asset for the world’s central banks.
Investing in gold is an old way of spreading investment risk, and this narrative is still true today. Gold has not only served as an investment vehicle, but it was used as currency for settlement of goods and services. The yellow metal has also found an enormous amount of use cases across various industries.
What percentage of an investment portfolio should be invested in gold?
Investors feel comfortable with investing in gold because of the value it draws from its use cases. Gold also has a wide range of properties that make it an important constituent of every investment portfolio: it has an inverse correlation with the price of stocks, it is a good hedge against currency devaluation, and it is a good financial instrument in times of political as well as financial instability and uncertainty.
It is always a good idea to have a solid percentage of one’s portfolio invested in gold. Precious metals, and especially gold, deserve a spot in every well-invested portfolio.
One of the most debated subjects in gold investing is, How much of a portfolio should be allocated to gold? As mentioned before, investment goals differ among investors and could also be influenced by long, short, or mid-term goals, appetite for volatility, and other factors.
Personal information, such as age, level of income, liability, and family status, could also influence investment choices. While this information differs across individuals, the percentage they allocate to gold investments differs as well.
Among gold investors, an allocation of between 10% and 20% of an investment portfolio is typically considered to be the best practice. This will go a long way in cushioning the negative effects of downward stock movements in times of economic hardship or a financial crisis.
For the long-term perspective, maintaining a balance between investment in stocks, precious metals, bonds, and cash is the best route to follow.
With that in mid, here are three of the most popular ways to invest in gold:
Exchange-traded funds
One way an investor can dip into gold investments is via a gold ETF (exchange-traded fund). ETFs are gaining increased popularity because of their basket of goods approach, which affords investors the privilege of owning a wide range of securities with a single investment fund.
The advantage of a gold ETF is that it enables the ownership of gold without incurring storage costs and delivery expenses. There is a wide range of existing gold ETFs, but two popular ones are the iShares Gold Trust ETF (symbol: IAU) and SPDR Gold Trust ETF (symbol: GLD).
Physical gold bullion
Investing in gold bullion is one of the oldest ways of investing in gold. Most investors consider this appropriate if they’re interested in taking physical possession of the gold. Such deals are completed through gold dealers, and the gold gets delivered to the investor. However, one potential drawback of investing in physical bullion is that there are storage costs if you want it to be held by a custodian.
Gold coins and small gold items
Investing in gold coins and small gold items is becoming increasingly popular, and it is also an appropriate way for investors who are aiming to take physical possession of their assets. This is one of the most affordable methods of gold investing.
Investing in small gold items is easy and straightforward. There are a lot of dealers in the small gold items market already. For gold coins, there are various options available for investors, such as the Krugerrands, Canadian Maples, and American Eagles. If you are interested, you can visit the US mint website to search for a list of all accredited dealers of the American Eagles.
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