What percentage of your portfolio should be in precious metals?
A rule of thumb is to limit gold to no more than 5 to 10% of your portfolio. Depending on your situation and risk tolerance, you may feel more comfortable with a larger or smaller percentage of gold in your portfolio. The portion of your portfolio that you dedicate to precious metals depends on your risk sensitivity. We generally recommend that our clients dedicate 5 to 15% of their portfolio to precious metals.
The investigation revealed that the “sweet spot” for the gold share in the portfolio is 20%. In the long term, this offers the best balance between risk and return. Because of their more modest returns, it is best to invest more heavily in precious metals later on in the investment career. Those starting their investment careers are often best at investing just 1-2% of their investments in precious metals.
However, there are exceptional circumstances under which it might be advisable to invest in more significant precious metals at the start of your career. Physical gold should add a new dimension to your asset portfolio and may initially invest only 5-10% of your liquid assets. The easiest way to add gold to a portfolio is with an ETF called SPDR Gold Shares, which is commonly known under the symbol GLD. Here are 11 important factors to consider when determining the amount of precious metals you want to invest in.
A few months ago, I wrote about the need for a half-yearly financial audit to review your spending habits and goals, and how your portfolio has been performing so far, and make adjustments as needed to prepare your portfolio (and yourself) for this. The specific amount of your portfolio that should be used for precious metals depends on your circumstances. In fact, it is important to maintain this percentage by regularly rebalancing, buying and selling gold regularly. This allows you to determine whether your precious metals portfolio is in line with your risk tolerance and expected returns, and it can help you determine the amount of each precious metal to buy.
Investments in precious metal ETFs can provide much-needed cash flows in times of market downturns and slowdowns in your economic cycle. Gold and silver are strategic long-term holds that can preserve your assets should your company need to close its doors. Enter precious metals, one of the most useful alternative asset classes for investors looking to reduce their exposure to equity market volatility. Precious metals can be a big asset to your portfolio and protect you from these inevitable economic downturns. Gold and other precious metals tend to gradually rise in value over the long term compared to other investments.
Talk to your financial advisor about investing in popular low-risk gold or precious metal ETFs before investing in gold and precious metals.