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Why you shouldn't time your gold investment

Gold prices have risen this year, but gold is better known for its stability over longer time periods. Getty Images/iStockphoto

2023 has been a great year for gold prices. Not only has the value of gold risen steadily, but it crossed the $2,000 threshold a few times, nearly surpassing its all-time high in April and again in May. 

Given the significant growth — coupled with rising consumer prices, concern over a recession and uncertainty in other areas of the financial system — more investors may be considering gold today. While now may certainly be a good time to invest, it's important to remember what a gold investment is best suited for. 

Rather than planning a short-term investment in which you buy low, then sell high, investing in gold may have much more of an impact when you use it as a store of value in your long-term investment plan. Read on to find out more about why timing the market can be a mistake, and how you can get more value with other strategies.

Interested in buying gold? Learn more about your options now with a free information kit.

Why you shouldn't time a gold investment

Long-term investors will tell you that trying to time any market's performance is never a great idea. That's especially true for gold, which can have big price swings over short time periods, even as it stays relatively stable over time. 

"Although gold can see a dramatic rise in price during times of volatility, I don't recommend trying to time those price movements," says Alex Rezzo, CFP, founder of Andante Financial. "First, it's tough to time your entrance and exit to your gold position profitably, and even professional commodities traders suffer significant losses trying to do this."

What's more, its overall price stability doesn't make it ideal for growth, anyway. If you're investing in gold, you're likely looking for a way to maintain your portfolio's value during periods of downturn. Traditional investments like stocks and bonds are much better suited for growing wealth.

"Short-term focus on when to get in and out of a gold position can distract investors from more sustainable sources of long term growth that we see in diversified exposure to resilient businesses through stocks," Rezzo says.

So if you decide to invest in gold, use it for the characteristics unique to gold — as a long-term store of value and portfolio diversifier — not as a quick way to increase your investment value.

Find out more about how to use gold in your portfolio with a free investors kit today.

Smart ways to invest in gold instead

In general, gold is best used for stability and diversification. You can use it to hedge against periods of inflation and keep your portfolio stable during market downturns — especially over a long investment timeline.

For example, "10 ounces of gold bought 23 years ago in 2000 would have cost around $2,800," says Mel Mattison, CFP, financial services professional and consultant. "Now, a child born then would have almost $20,000, perhaps just enough for a down payment on a starter home. Clearly gold has outperformed inflation during that period. And that's the point, over the long-term gold will never let you down, at least it never has for the last two thousand years or so."

If you do invest in gold, it's smart to allocate only about 5%-10%, to allow the rest of your portfolio to increase with more traditional, growth-focused investments over time. This allocation can help you maximize the safe haven aspects of gold in any economy.

Is gold a good investment for you? Speak with an expert who can help guide you through your options today.

The bottom line

Gold can make a good addition to your investment portfolio — with the right approach. Instead of timing the market, you're more likely to get the best value from your gold investment with a long-term investing mindset. Alongside traditional assets like stocks, gold can help you diversify against downturns in the market and help you maintain value during periods of inflation or economic uncertainty.

Find out how you can start investing in gold today with a free investment guide!

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