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How much should you invest in gold? Weigh in on the experts

Gold can help you diversify your portfolio but you should limit how much you invest, say experts.

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If you are wondering Adding gold to your portfolioKnowing exactly how much is right for your goals and long-term financial plans can be helpful.

One of the best benefits Investing in gold diversity – A method of reducing your investment risk by holding multiple types of investments including stocks, bonds, alternative assets like gold and more.

In fact, “investors should consider diversification as a key way to reduce risk in their portfolios,” says Dana Maynard, CFP, founder and chief financial planner of Twin Cities Wealth Strategies. It’s a way to limit exposure to any one type of asset, he says.

When you hold some assets that perform well when others are underperforming, you can reduce some of the volatility in your portfolio. As a result, you don’t want to put 100% of your money in any single asset class the goldstocks, bonds or otherwise.

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How much of your portfolio should be held in gold?

Gold is considered an alternative asset or form of investment that stocks, bonds or cash are not. Alternative assets can include silver as well as other commodities like collectibles, real estate and more.

Generally, investors should not allocate around 5% to 10% of their portfolio to alternative assets such as gold. However, it’s always important to take your personal circumstances and goals into account.

Still, Maynard echoes the 5% rule in his recommendations: “The best way to reduce portfolio risk is to diversify as much as possible,” he says. “I would recommend no more than 5% of a single holding in a well-diversified portfolio.”

Timing can also play a role in your decision. For example, Gold prices have risen significantly this year, as uncertainty continues to plague the economy. For some, that can Now is a good time To hedge against other investments that may underperform.

“As inflation continues to rise, this may be an excellent time to increase allocations to gold,” said Frank Trotter, president of Battle Bank. told CBS News earlier this year. “Over time, analysts have shown that gold has been a good hedge against inflation.”

Still, some investors may choose to remain conservative. If diversification is your goal, you don’t necessarily need to devote a large portion of your holdings to gold.

“A small amount of gold can help diversify a portfolio,” says Patrick Dinan, CFP, president and founder of Impact Fiduciary. Dinan says his clients keep no more than 2% of their portfolios in gold as a non-correlated alternative asset (meaning it’s with other general investments). unrelated, such as stocks).

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Should you invest in gold now?

When it comes to investing for the long term, a well-rounded portfolio can help you weather changing economic conditions and periods of uncertainty.

Gold is often seen as a great means of diversification as it acts as a safe haven over time recession And its price can often act inversely in the stock market. There is still a risk, of course; Every year does not end with gold prices rising and you may miss out on potential gains from riskier investments.

But for a relatively fixed variation option Today’s inflationary climateIt can be a smart choice.

However, before you make any financial decision, consider your entire portfolio and allocate the amount that best helps you meet your long-term investment goals. If you’re unsure about any new investment options, including gold, talk to a trusted financial advisor, who can help you understand the details of your personal portfolio and financial plan.

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MoneyWatch: Managing Your Money

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