Is now a good time for beginners to invest in gold?
Those hoping for signs that inflation was permanently cooling were disappointed last week after the latest report from the Labor Department showed it unchanged in September. Stuck at the same 3.7% rate it was in August, the Federal Reserve still has some work to do to get inflation down to its target 2% goal. And with the benchmark interest rate already at a 22-year high, that could mean more pain for borrowers thanks to another potential rate hike.
In this environment, many savers and investors look for ways to hedge their losses and protect their existing funds. One such way to do so is by investing in gold. Investing in the precious, yellow metal actually hit an 11-year high in September, thanks to a variety of factors. But is now a good time for beginners to invest in gold, too? Or should they take their chances with some other, more well-known assets? That's what we'll discuss below.
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Is now a good time for beginners to invest in gold?
While gold can be a valuable asset many times in your life, it can be particularly helpful for those just getting started with their investments. Here are three reasons why now could be a good time for beginners to invest in gold:
It can diversify your portfolio
Gold can act as a great diversification tool for your overall portfolio, providing some security when other assets like stocks and bonds experience turmoil. When those assets underperform or lose value, the price of gold tends to stay steady and can help offset what otherwise could have been a more significant loss.
That said, gold investing is just like any other investment in that it needs to be in the right amount to truly be worthwhile. While this amount will vary based on age and your overall investor profile, most experts recommend limiting a gold investment to 10% of your overall portfolio.
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It can help with inflation
One of the major reasons why gold has seen an uptick in 2023? That's due to inflation. Or, more specifically, the help gold can provide during inflationary periods like the one we are currently experiencing.
Gold can help provide a hedge against inflation by keeping its value relatively steady when the purchasing power of the dollar erodes. It's not always an exact science — and it's not fool-proof — but the price of gold, historically, tends to hold well and may even increase during times of high inflation.
And compared to the performance of stocks, bonds and other assets, that can be particularly valuable when inflation is still causing the costs of borrowing and everyday living to remain high.
It can be easily bought, stored and sold
Gold can provide some tangible benefits for beginners, too. It's a liquid asset that can be held in the palm of your hand, weighed on a scale and be purchased, stored and sold all over the world. While that may not be seen as an advantage by some, it can be for beginners who want to know exactly where their investment dollars are going.
Knowing that you don't necessarily need a broker or bank to help you get in or out of this investment can be a major advantage for many. Instead, you can easily sell your investment, often at a slight profit, by taking a short car ride to a dealer or jeweler.
The bottom line
Gold can be a smart investment for young investors, older investors and even those just getting started. Due to its portfolio diversification ability, its well-known help against inflation and its use of ease when being bought, stored and sold, gold can be especially advantageous for those looking to start building their profile. As with all investments, however, it pays to do your research and review the companies on the market to ensure that the precious metal is the right type of investment for your individual needs and financial plan.
