For this reason, investors prefer to add gold to their portfolio to hedge against inflation. Most estimates assume that gold investments should only make up 5-10% of your portfolio and nothing more. This ensures that your portfolio has space for other investments, such as mutual funds, stocks, P2P loans, etc. It is an unlikely scenario in which all investments will be strong at any given point in time. Successful investors identify the right markets at the right time, with physical gold being a major exception to this rule as it’s such a long-term investment that there’s never a bad time to own it.
The easiest way to add gold to a portfolio is with an ETF called SPDR Gold Shares, commonly known by the symbol GLD. Physical gold should add a new dimension to your asset portfolio and perhaps invest only 5-10% of your liquid assets initially. However, before you decide that you need to buy gold right away, it’s a good idea to take a step back. If you don’t care whether or not you can touch the gold you own, the cheapest way to buy it is through an exchange-traded fund (ETF) or an investment fund.
First, every retail investor should have no more than 10 to 15 stocks, which consist of high-yield stocks, growth stocks, speculative stocks, a healthy geographical stock, and gold. Experienced investors are aware of the importance of physical gold as part of a balanced investment portfolio. If you want to add some balance to your portfolio, gold can be one way to do that by diversifying your assets in a way that partially protects you from a market event. Although gold may have little practical use, investors perceive an intrinsic value in this precious metal.
Some believe the United States would benefit from its gold stockpiles if they moved to a gold standard. There is so much money in circulation (paper and digital) that switching to a gold standard is impracticable and highly unlikely. Allocating your investment interests across stocks, real estate, and precious metals is a smart and low-risk way to manage your portfolio. It’s worth noting, however, that if your short-term outlook for the overall economy is very positive, keep your gold investment to a minimum, as it is expected that the price of gold could fall as the global economy recovers and starts to grow faster.
Some investors believe gold isn’t just a hedge against inflation or a useful part of a diversified portfolio. Similarly, a National Bureau of Economic Research report written by Duke University professors Campbell Harvey and Claude Erb (former fixed income and commodities managers at investment fund firm TCW Group) suggests that gold provides adequate inflation hedge over long periods of time, measured in decades.
