The Benefits of Investing in Gold: Is it Good for Your Portfolio?

Gold is an important part of a diversified investment portfolio, as its price increases in response to events that cause the value of paper investments, such as stocks and bonds, to decline. Although the price of gold may be volatile in the short term, it has always maintained its value over the long term. One of the main reasons for including gold in your portfolio is to hedge against inflation. As a valuable storage vehicle, gold has coped quite well over time.

Inflation can erode the purchasing power of a dollar, but gold can help you hedge against that loss in value. Gold is not always a good investment, however. The best time to invest in almost any asset is when there is negative sentiment and the asset is cheap, which provides substantial upside potential when it returns to favor. According to financial expert Jim Cramer, gold tends to rise when everything else falls.

Gold offers investors insurance against geopolitical events, uncertainty and inflation. One of the best characteristics of gold is that it preserves wealth. Gold has been a valuable resource for thousands of years, and multiple civilizations and empires have come and gone. Some of these people had their own coins that today have only historical value, but gold continues to have monetary value and can be easily bought and sold.

What are some good reasons to add gold to your portfolio? First, it is an asset not correlated with stocks and bonds. Stocks and bonds are negatively correlated, so when stocks rise, bonds tend to go down. Gold does not behave like either, which makes it an excellent asset class when considering diversifying against holdings of major stocks and bonds. It would help if you diversified the portfolio with gold as a hedge against inflation. You will see the price of gold rise in response to certain events that reduce the value of stocks and bonds.

Gold also helps protect your portfolio against adverse stock market movements. Research has shown that the “sweet spot” for the percentage of gold in the portfolio is 20%. In the long run, this provides the best balance between risk and reward. Government title to all gold coins in circulation and end the minting of any new gold coins.

Some believe that if the United States were to change to a gold standard, it would benefit from its gold reserves. Therefore, investing in gold works as a good hedge against currency volatility and inflation, as rising inflation rates often result in higher gold prices. The easiest way to add gold to a wallet is through an ETF called SPDR Gold Shares, commonly known by its symbol GLD. But retirees who may not have invested in gold ETFs before may want to do their due diligence, as gold is a misunderstood asset class. One way to reduce the risk of investing in gold stocks is to invest in mutual funds and gold ETFs.

You have the Gold Exchange Traded Fund as a type of mutual fund that tracks the domestic price of physical gold. Investors can invest in gold through exchange-traded funds (ETFs), buy shares in gold miners and partner companies, and purchase a physical product. In short, this act began to establish the idea that gold or gold coins were no longer needed to serve as money. You might consider adding gold to your portfolio in the event of a gold price correction if your portfolio lacks an adequate allocation to this asset. The creation of a gold coin stamped with a stamp seemed to be the answer, since gold jewelry was already widely accepted and recognized in various corners of the earth. Gold stocks generally rise and fall with the price of gold, but there are well-managed mining companies that are profitable even when the price of gold falls. Gold prices often move in the opposite direction to the dollar, so if the greenback weakens, gold is likely to strengthen.

Buying physical gold often entails high selling costs, and it also carries the risk of relying on the retailer to sell pure gold.

Alan Crippen
Alan Crippen

Hipster-friendly baconaholic. Infuriatingly humble food fan. Passionate organizer. Typical tv guru. Infuriatingly humble web maven. Coffee evangelist.