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How gold investing beginners can get the greatest return

Gold makes a good long-term investment for those looking to weather market downturns and hedge inflation. Gunay Mutlu / Getty Images

If the rising price of gold this year — combined with ongoing inflation and economic uncertainty elsewhere — has you interested in adding some of the precious metal to your portfolio, you're not alone.

Beginner gold investors are in a good position to use gold to diversify their portfolios and add value to their long-term investing plan. But it helps to do your research first — from deciding how to best make your gold investment to buying the right amount and knowing what to expect when it comes to performance and growth. With some preparation, you can set yourself up to maximize your gold investment and reach your goals over time.

Learn more about how to get started with gold investing today with a free information kit.

How gold investing beginners can get the greatest return

If you're new to gold investing, keep these three things in mind before you buy in:

Choose the right investment type

If you want the chance to benefit from the value of gold directly, you might choose to buy gold bars or coins. You can purchase gold bullion from a reputable online or in-person dealer in the amount you wish. Just make sure to know how you'll insure your gold bars or coins and keep them safe, either at home or with a third party storage facility. 

Another option for retirement-minded gold investors is a gold IRA. These individual retirement accounts work similarly to Roth or traditional IRAs that hold equities, but you can use them to invest in IRA-eligible gold and other precious metals. To simplify the process, you can work with a gold investment company to make your gold purchase and find an IRS-approved custodian to keep it for you.

If you're not interested in physical gold bullion, you might also decide to invest in gold indirectly, through a gold ETF or stock in gold mining companies. You can make this type of investment and gain exposure to gold directly through your current brokerage. However, be aware that other factors like company performance can influence your investment value.

Think a gold IRA could be right for you? Explore your options with a free investors kit!

Decide how much to invest

When you invest in gold, it's important to understand how to best use it as part of your overall portfolio. 

"In order to find out the right amount of gold in a portfolio allocation, investment horizon, and risk tolerance are very important factors to take into consideration," says Ohan Kayikchyan, CFP, founder of Ohan the Money Doctor. 

While gold's value does go up over time, it's not a way to grow your wealth the way that traditional investments in stocks can. Instead, it's a way to maintain value — and only requires a relatively small allocation. 

"There is an industry 'rule of thumb' to allocate a maximum of 10% of the overall portfolio to gold," says Kayikchyan.

That's because gold is best used as a diversifier in your portfolio. With an allocation of around 5% to 10% at most, gold can help you get through periods of economic uncertainty, like when the stock market drops during a recession. But it also leaves plenty of your investments allocated to riskier, higher-earning investments that can increase your value over the long run.

Prepare to invest long-term

Along the same lines, using gold as a portfolio diversifier means you should be prepared to invest long-term. 

Gold's price can fluctuate over short periods, even if it does trend upward over time. With a long investment horizon, you can benefit from gold's overall stability and value without having to worry about short-term price drops.

What's more, economic cycles of inflation and recession are bound to happen at different points over the next few decades. And since gold, historically, is best used as a hedge against periods of inflation and a store of value during economic downturn, you can continue to benefit from your gold investment well into the future.

Consider speaking with an expert today who can detail how the precious metal may fit within your individual portfolio.

The bottom line

If you're thinking about investing in gold today, you can set yourself up for success with a bit of planning before you buy in. Take time to decide the right investment type, including whether you want to invest in physical gold. Determine how much you want to buy based on an allocation of 5% to 10% of your portfolio. And be prepared to hold onto your gold investment for the long-term, so you can maximize it over your entire investment timeline.

Explore more options for gold investing today with a free information guide here.

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