Gold has been used as a safe haven asset for decades and has protected the wealth of many investors throughout various economic crashes, but having a good understanding of the percentage of gold to include within your portfolio can at first seem like a tricky question to answer. There are a number of factors that come into play when you are balancing your asset classes ranging from the timeframe you are investing on to your general tolerance to risks and bull and bear markets which can have an impact on your allocation.
BullionVault is a vaulted gold investment platform with coverage both in the UK, USA and wider markets.
Their gold investment calculator shows the impact that allocating a proportion of your investment portfolio in gold would have over various timeframes and market conditions.
The impact of having a portion of gold in your portfolio will depend on the allocation, but you are essentially paying a premium to protect the investment over your investment timeframe.
According to BullionVault: “For investors holding gold over the last 40 or 20 years, the “premiums” on this investment-risk insurance have been paid in the form of slightly lower overall returns across the long term.
You could try to side-step this cost by only buying gold before it goes up – and before other assets fall – and vice versa. But you can’t know in advance how any investment will perform over the next week, let alone the next year or longer.”
The table below shows the impact that some of the most common gold asset allocations would have had on a simple stocks and shares portfolio. The data shows that gold protects against losses and the impact on total returns is the ‘premium’ that you pay for the stability.
What are the Main Ways to Invest in Gold?
If you are looking to take a step towards diversification it is of course important to conduct independent research and seek financial advice if needed. The below 4 methods offer different benefits and drawbacks but are all ways that you can include more of this precious metal within your portfolio.
Physical Gold: Buying gold in the form of coins, bars, or jewellery. You actually own the gold, but you need to store it safely.
Gold ETFs and Mutual Funds: This involves Investing in funds that are traded on the stock market, investing this way means you dont own the gold at all but get exposure to the price of gold.
Gold Stocks: Buying shares in gold mining or trading companies. The value of these shares is linked to gold prices but also depends on the company’s performance.
Vaulted Gold: Owning gold that is stored in a secure vault. You don’t keep the gold yourself, you can buy and sell it online and as you own the gold you should always have the option to withdraw your gold.
Having a portion of gold could be a way to diversify your retirement savings, but it is important to do your own independent research to ensure you are properly formed and have an allocation that you will be comfortable with and one that will help you reach your financial goals.
This content is for informational purposes only and should not be taken as financial advice. Always consult a professional before making any investment decisions. Remember that investing involves risks and is not suitable for everyone. Past performance is not indicative of future results.
