The 15 to 25% allocation approach If you think that rising inflation rates could cause losses or even the collapse of the financial system, allocating 15 to 25% of your portfolio to gold and gold-related securities could help you soften the blow. Your portfolio should be structured in a way that helps you achieve your long-term goals. However, many experts warn that you should be careful about the amount of gold you should include in your portfolio. A general rule is to limit gold to no more than 5% to 10% of your portfolio.
Depending on your situation and your risk tolerance, you may be more comfortable with a larger or smaller share of gold in your portfolio. Limit gold investments to 5-10% of your portfolio. This generally agreed amount helps mitigate riskier investments without relying too heavily on it. Many experts will tell you that you should keep your investment in gold limited to between 10 and 15% of your total portfolio.
But this may not make more sense to you because everyone has specific goals that they're trying to achieve. If you plan to invest in gold because of its scarcity and the estimated increase in value once everything has been extracted, keep in mind that gold mining is expected to be unsustainable by 2050. People who invest in gold with this method enjoy all the benefits of investing in the metal, except for its quick liquidity. Others believe that storing gold in their homes provides them with a safe way to invest, and the liquidity aspect offers a benefit that outweighs any risk.
Authorities estimate that most of the world's gold has already been mined and is currently circulating on the world market. This option is attractive to many people because of the security of knowing that they can always return their investment in cash at any time. When asked about the return to be expected from investing in gold over the long term, Pankaj Mathpal, of Optima Money Managers, said: In the long term, gold outperforms the return on debt funds and, if you continue to invest in gold for 15 years or more, you can expect to see growth of at least double digits after 15 or more years of investment. Another strategy is to invest in mining companies or ETFs in the metals sector that offer diversified exposure to many different types of metals.
Since the relationship between gold and inflation does not appear to be statistically significant, this should not be the only reason to invest in gold. Some people believe that the price of gold will skyrocket in a time of global turmoil and total economic collapse because people will need it for these purposes. Buying physical gold often entails high selling costs and also involves the risk of relying on the retailer to sell pure gold. Some investment professionals have stated that there is no statistically significant relationship between inflation rates and the price of gold, at least in the short term.
Let's review some of the main reasons why experts say that everyone should have some gold as part of their investment portfolio. Edwin Cannon has dedicated his entire career to the financial industry and specializes in alternative investments and surviving marketing turmoil. That's why many recommend investing in gold now, as the price will be much higher in a few decades. However, many bonds, certificates of deposit, and other investment tools carry serious fines and penalties if you withdraw your investment too soon.