The proportion of your portfolio that you dedicate to precious metals depends on your risk sensitivity. In general, we advise our clients to use 5 to 15% of their portfolio of precious metals. Because of their more modest returns, it’s best to invest more in precious metals later in your investment career. Those who start their investment careers will often do best by investing just 1-2% of their investments in precious metals.
However, there are exceptional circumstances in which it might be advisable to invest in more significant precious metals at the start of your career. Peter Schiff has always recommended holding 10-20% of an investment portfolio in physical precious metals. But how much of that percentage should be in gold and how much in silver? Your portfolio should be structured in such a way that you can achieve your long-term goals.
However, many experts warn that you should be careful about how much gold you should include in your portfolio. 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 share of gold in your portfolio. 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 reward. From an investment theory perspective, precious metals also have a low or negative correlation with other asset classes such as stocks and bonds. This means that even a small percentage of the precious metals in a portfolio reduces both volatility and risk. Readers should probably never regard gold as a core asset in their respective portfolios, as gold and accompanying metals can be unpredictable, pay no dividend, and could pose a liquidity challenge, particularly in physical form.
