How Much Gold Should First Time Buyers Consider?
If you’re looking to diversify your investment portfolio in your pre-retirement years, you might consider allocating some of your money to gold.
First-time buyers in their 50s and 60s should invest a small portion of their portfolio in gold. Here are some simple allocation guidelines for beginners who want to benefit from the protective properties of gold and price movements without investing heavily in other assets.
Pros and cons of investing in gold
The precious metal can act as a hedge against inflation and a safe haven during times of economic uncertainty. It can also diversify your portfolio, which can be a good idea if you only invest in stocks and bonds.
But there are also downsides. Gold can underperform assets with growth potential, such as stocks, meaning investing too much in another asset could mean limiting your long-term growth. Investing in gold can come with other issues that you don’t have to consider when buying stocks or bonds, such as storage costs when buying physical assets, and complex financial instruments like futures and swaps.
Overall, investing too much of any asset can lead to significant risks in the investment portfolio, so it is important to build your gold position responsibly.
Gold Offer: Sign up with American Hartford Gold today and get a free investor kit, plus get up to $20,000 in free silver on qualifying purchases.
How much to invest in gold
The amount of money you should invest in gold if you choose to buy the precious metal will depend on your unique financial situation, including your goals and risk tolerance. But mainstream experts recommend allocating just 5-10% of your portfolio to gold.
This gives you inflation and inflation hedging while allowing you to spread your money across other investments. People with a high risk tolerance and few immediate income needs can approach the 10% limit. It may also make more sense to make gold a larger percentage of your net worth if you have a long time horizon and receive income from sources like Social Security and pensions. Investment research firm Morningstar defines a limited exposure, which is what the firm proposes to gold, as 15% of assets or less.
More Money: See how you can get up to $1,000 in stocks when you fund a new SoFi investment account
Adjusting over time as you get older
Investment strategies are not meant to be set aside. Water can also change, especially as you get older and your risk tolerance changes. Investors can invest more in gold if their income increases and they have more cash on the side. However, people who want to diversify their portfolio can gradually sell gold and equities.
New investors may want to start at the lower end of the range and gradually build their position if it makes sense to do so.
Save Smartly: Manage your money with Rocket Money’s budgeting app, one of Money’s favorites
