How Much of My Portfolio Should Be in Gold and Silver?
Gold and silver should form part of your portfolio, though how much it accounts for depends on personal choice; younger investors with smaller savings should look toward physical precious metals for wealth preservation purposes.
Many investors opt for investments with an approximate return of 10% as this provides a firm foundation and protects them against inflation and currency devaluation.
Deliberating whether to include gold and silver in your portfolio is ultimately up to you, but here are a few guidelines you can use when developing a bullion strategy that fits with your circumstances.
At first, it’s important to identify why you’re investing in precious metals – long-term gains or protecting savings against an impending recession or financial crisis?
For wealth preservation, gold should account for a larger portion of your portfolio than stocks and bonds do, since gold doesn’t experience the same type of market fluctuations that threaten to deplete its value. Furthermore, its price acts as a great hedge against inflation. But keep in mind that commodities, including gold and silver investments, don’t generate cash flows like businesses do or bonds do – you must still ensure you maintain balance across your investments portfolio.
Gold and silver make excellent short-term investments because their values hold steady during economic instability, when other investments such as stocks, bonds, real estate or commodities plummet. But you must be wary not to invest too much of your savings in precious metals – otherwise you risk losing funds that would be needed elsewhere for expenses like rent or food payments.
On average, investing 5% to 10% of your portfolio in precious metals should be considered prudent and low-risk strategy to diversify investments, protect wealth against inflation or currency weakness and decrease market volatility. Precious metals also serve as an excellent protection against recession or financial crises since their long-term value-storing properties don’t correlate closely to stocks or other asset classes; and being global currencies they offer peace of mind wherever you may go.
Gold and silver provide investors with a powerful diversifier. In particular, their low correlation to stocks, bonds and other assets makes them ideal choices to include as diversifiers in investment portfolios.
As such, precious metals offer protection if stocks and funds experience a sudden crash, helping preserve your savings and provide additional capital when equity prices become undervalued.
Your ideal ratio of gold to silver ownership depends on your financial goals and risk tolerance, but in general we advise our clients to own two thirds of their precious metals in gold while one third in silver, providing them with both a secure foundation in yellow metal while taking advantage of silver’s growth potential.
If you are just getting started investing in physical gold and silver, we advise starting off small to familiarize yourself with the process and build up your portfolio gradually.
Precious metals offer great diversification potential, as their low correlation to stocks and bonds makes them an effective asset class to include in a portfolio. But it is essential not to over-diversify by investing too much of your portfolio in gold and silver.
Silver tends to be more volatile than gold, often outperforming it during bull markets while underperforming it during bear ones. To reduce volatility, we suggest allocating equal portions to both. To do this effectively. we suggest diversifying with a 2:1 allocation between both gold and silver investments.
Gold and silver investments vary based on your goals; if you are saving for retirement 30 years from now, investing more of your savings into gold and silver may provide protection from inflation; otherwise if you have less capital to invest, equities might offer greater potential growth potential.