Gold is often considered a strong asset forand as a in times of uncertainty. The precious metal can be appealing through periods of economic uncertainty and recession, as well as when inflation runs high. But like any investment, you can benefit from gold most when you understand how it fits within your overall financial plan, and make a , not one based in fear.
"The ideal time to build and allocate a model portfolio would be in less volatile and stressful times when emotions aren't controlling decision-making," says Gary Watts, vice president and financial advisor at Wealth Enhancement Group. After all, "Sailors outfit and provision their boats before the storm."
One way to figure out if gold is right for you is by researching its benefits and drawbacks as an investment choice. If you're thinking a free information kit today.for you to buy gold and prepare for the future, start by requesting
How to invest in gold
Investing in gold can mean buying. For retirement investors, a can be a good option for physical gold investing. But depending on your goals, there may be more , secure or easy options.
"For the average person, owning a fund (i.e., an ETF or mutual fund) that invests in gold is probably the easiest way," Watts says. "There are funds that invest in gold itself only, others that invest in a combination of metals, and others still that invest in mining operations and the like."
that hold gold within the fund don't require you to actually store gold bars or coins yourself, but you can benefit from the physical . Some investors might instead prefer to stick to the stock market (and potentially earn dividends) while still getting exposure to gold through equities of precious metals mining companies.
Choosing between these options can depend on your goals, a free investors kit to learn more about this unique opportunity.and current portfolio composition. Request
Pros of gold investing
Buying gold can have several advantages:
- Hedge against inflation: As inflation increases prices, the dollar's purchasing power decreases. So, if you have cash, you're effectively losing money. Gold, on the other hand, may . Not everyone agrees and gold may not always rise when inflation goes up, but it could still be an investment factor.
- Safe haven through economic changes: Buying gold can potentially help investors get through uncertain economic conditions, considering the the Federal Reserve Bank of Chicago compared gold prices to a University of Michigan study of consumer expectations and found that, as the proportion of consumers with pessimistic expectations goes up, the price of gold is positively correlated. That doesn't mean gold will always go up when the economy looks shaky, but it could be good for those who plan ahead. during these periods. An analysis by
- Diversification: Some investors as a way to . Rather than having all of your money tied up in one asset class, different could potentially help you better manage risk and return. "Gold — or other precious metals — in the right allocation, can make sense in a balanced portfolio, but allocation always depends on a number of other factors like time horizon, investor experience, tolerance to volatility, cash flow needs, etc.," says Watts.
If these are some of the benefits you're looking for then start investing in gold today.
Cons of gold investing
While gold can help add balance and security for some investors, like most investments, there are also risks to watch out for.
- Performance over time: Gold might outpace other assets during specific periods, while not holding up as well to long-term price appreciation. If you're trying to , for example, putting too much money into gold could hold back long-term gains you would have gotten with stocks or bonds. That's why it's important to (generally only 5% to 10% of your overall investments).
- Investments based on fear: There can be a tendency to turn to gold only when markets get shaky, causing investors to make decisions based on fear, rather than on what's best for their long-term success. "I've seen the gold question come up in every single market downturn since I started in this profession," Watts says. "Too often, retail investors or DIY-ers respond with emotional decisions and end up hurting themselves…Panic and hope are not strategies."
- Complexity: If you're not already familiar with gold and the precious metals asset class as a whole, it can take time to get up to speed. Choosing this asset class over traditional stocks and bonds isn't just a matter of picking which one you think will gain more. There are also considerations around risk, cash flow, and more. So, adding gold can also add some complexity to your investment decisions that you should be prepared for.
The bottom line
Buying gold can make sense for many people. It haslooking to diversify and protect their assets during periods of downturn, but it can also limit your earnings over time and perform differently than you might expect. Take time to consider your options. If you're thinking about today, make sure you know how it best fits into your overall investment strategy and financial plan.
Learn more about your gold investment options by requesting a free investors kit here.
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