6 reasons beginner investors should add gold to their portfolios
It can be tough for beginners to navigate the vast investing landscape. There are any number of traditional investment options to choose from — and each offers its own potential benefits and downsides to consider.
Plus, there are other types of investments that are worth investigating, which can further complicate things. One of those options is gold investing, which can come in numerous forms, including gold bars and coins, gold-related stocks, gold IRAs or even gold exchange-traded funds (ETFs).
Many experienced investors add gold to their portfolios to ensure that they have a well-rounded and diversified investment strategy. And, gold can offer just as many unique benefits to beginner investors.
Explore the benefits of gold investing with a free information kit.
Why beginner investors should add gold to their portfolios
As a new investor, there are a number of reasons that it can make sense to add gold to your portfolio. Here are a few unique benefits it can offer.
Gold can help preserve your wealth
Unlike paper currency or digital assets, gold has inherent value that isn't reliant on any government's stability or the performance of a particular company. In turn, gold tends to hold its value, even during times of economic turmoil.
This makes gold a reliable asset for weathering market fluctuations and preserving your wealth in a tumultuous economic climate. The one downside is that gold doesn't typically grow your wealth as well as riskier investments can. Its value tends to grow over the long term instead.
Learn more about what gold investing can offer you here now.
Gold can help diversify your portfolio
The value of gold often moves in a different direction compared to other investments, which can help diversify your portfolio and mitigate losses from other investments, like stocks, during market downturns. By adding gold to your investment portfolio, you can help reduce overall risk by providing a counterbalance to traditional assets, like stocks and bonds.
Most experts recommend that beginner investors limit their gold investments to no more than 5% to 10% of their portfolios. However, you can determine what makes sense for you based on your risk tolerance and diversification strategy.
Gold acts as a hedge against inflation
Right now, inflation is at 3.2% — and it's eroding the purchasing power of traditional currency. But investing in gold can help because it can act as a hedge against inflation.
Here's how it works: As the general price level of goods and services rises, the value of gold tends to increase as well. This helps investors maintain their purchasing power when inflation is high — which is why it's smart to add to your portfolio right now, in the midst of high inflation.
There's a limited supply of gold — but ongoing demand
The supply of gold is relatively finite, and new discoveries are rare. This limited supply contrasts with the growing global demand for gold in industries ranging from electronics to jewelry. And, the demand from investors is increasing, too.
As the demand for this precious metal continues to rise, the value of gold may increase, potentially benefiting investors who hold it in their portfolios. And, it's a great time to buy it, because gold prices are down to a five-month low, offering investors an opportunity to buy in at a bargain.
Gold is a safe-haven asset
Gold is also considered a safe-haven asset. What that means is that during times of geopolitical uncertainty, economic instability or market volatility, investors tend to flock to gold as a refuge. This demand can drive up its price, making it a valuable addition to your portfolio as a way to navigate unpredictable market conditions.
It offers high liquidity
Unlike many other types of investments, gold is a highly liquid asset. It can be easily bought or sold in various forms. This liquidity provides investors with the flexibility to quickly adjust their portfolios in response to changing market dynamics.
The bottom line
As a new investor, adding gold to your investment portfolio can be a smart strategy to consider. Gold can offer a number of unique benefits that other investments can't, from portfolio diversification to hedging against inflation and helping protect your wealth during economic downturns. So while gold may not offer regular income, like dividends from stocks or interest from bonds, its unique properties make it a valuable component of a well-rounded investment strategy.
