Experts often recommend keeping 5% to 10% of your portfolio in gold, with some suggesting up to 20% for extra protection against inflation, market swings and global uncertainty. But there’s no one-size-fits-all answer — the right amount depends on your goals, risk tolerance and overall investment strategy. Here’s what to consider before you decide.
Why Gold Belongs in a Portfolio
You may already have stocks and bonds as part of your portfolio, but you should consider adding gold to your investments too. Here’s why:
- Diversification: It’s a smart move to have a variety of assets in your portfolio. Gold often works independently of how stocks and bonds perform. You can build a nice buffer against potential market volatility.
- Hedge against inflation: Historically, gold has always been a hedge against inflation. When fiat currencies decline, gold helps you retain your purchasing power.
- Safe haven asset: Gold is a good store of value. In times of stock market downturns, political upheavals and recessions, people can rely on gold since it is not tied to a specific government or corporation.
Factors That Determine How Much Gold You Should Own
Exactly how much gold to keep in your portfolio depends on your personal situation. While many experts recommend allocating 5% to 10% toward gold or other commodities, the right percentage for you comes down to several key factors:
- Risk tolerance: Gold is volatile, so you could lose money if you have to sell when prices are down.
- Cash savings: You should have an emergency fund of at least a few months’ living expenses in a savings account before you invest in gold.
- Years before retirement: As retirement gets closer, your investments don’t have decades to recover from ups and downs. A smaller gold allocation can help protect your savings if prices fall.
What a Balanced Portfolio Can Look Like
Take a look at how a $100,000 portfolio could be split among key asset classes.
| Asset Class | Percentage | Dollar Amount | Example of Assets |
|---|---|---|---|
| Stocks | 56.7% | $56,667 | -Large-cap, mid-cap and small-cap stocks -U.S. and international stock exchange-traded funds (ETFs) |
| Bonds | 28.3% | $28,333 | -U.S. corporate and government bonds -Bond ETFs |
| Gold | 10% | $10,000 | -Physical gold -Gold ETFs |
| Cash | 5% | $5,000 | -High-yield savings -Money market accounts |
Different Ways To Invest in Gold
Whether you want something hands-on or hassle-free, here are your top gold investment choices.
Physical Gold
Investing in physical gold means owning the metal directly, whether in coins, bars or jewelry.
- Gold coins and bullion: Purchasing gold coins and bullion bars is a direct way to own physical gold.
- Jewelry: While buying gold jewelry can be a tangible way to invest, it often includes a markup for craftsmanship, making it a less cost-effective investment option compared to bullion or coins.
| Pros | Cons |
|---|---|
| Tangible ownership | Less liquidity |
| Not tied to a corporation or government | Requires storage |
Gold ETFs
Gold ETFs offer the opportunity to invest in gold without the need to physically store the metal. These funds track the price of gold and trade on stock exchanges, providing liquidity and ease of investment.
| Pros | Cons |
|---|---|
| Highly liquid | No physical ownership |
| No storage required | Can be tied to some risk |
Gold Mining Stocks and Mutual Funds
Investing in companies that mine for gold allows you to benefit from the value of gold indirectly. However, this option introduces other risks related to the company’s performance and the mining industry.
Similar to ETFs, gold mutual funds invest in a variety of gold-related assets, including mining companies and bullion. This diversification can help mitigate some risks associated with gold mining stocks.
| Pros | Cons |
|---|---|
| Potential for high returns | Market risk |
| Dividends may be distributed | Tied to corporate risk |
Gold Futures
Gold futures are an agreement to buy or sell gold at a specific amount at a predetermined date in the future.
| Pros | Cons |
|---|---|
| Highly liquid | High risk |
| Significant leverage | Complex to invest in |
Risks of Owning Gold
Gold is a risky investment, so it’s important to understand what you’re getting into before you invest.
- Price volatility: Gold prices can rise and fall quickly. And when you buy physical gold, the price you pay includes markups for broker and dealer commissions, premiums and other fees. These fees can make it even more difficult to recoup your investment if you have to sell.
- No yield: Bonds and some stocks pay interest and dividends that generate income whether or not prices appreciate. Gold has no yield, so your returns are based 100% on the difference between your purchase price and sale price.
- Storage costs: Once you’ve purchased gold, you’ll need a safe place to store it. This cost can eat into your profits.
How To Store Gold Safely
You’ll want to protect your gold investment by considering these storage options:
- Home storage: You can purchase a safe and keep the gold at home. However, you’d have to add “scheduled” personal property coverage to your homeowners or renters insurance policy to cover the gold’s full value.
- Safe deposit box: For a modest annual fee, you can rent a safe deposit box from a local bank. This gives you better security while still giving you easy access to your gold.
- Professional vaults: Gold brokers or dealers often provide vault storage for a fee. Storage fees are usually a percentage of the stored gold’s value.
When To Buy and Sell Gold
It’s better to buy and sell gold when certain factors are at play. Here’s what you need to know.
When To Buy Gold
- Economic uncertainty: Gold is considered a safe haven asset during economic uncertainty. When there is a recession or market downturn, gold can be a hedge.
- Market dips: When gold is at a low price, it may be a good entry point to diversify your portfolio.
- Balance your portfolio: Gold can be a good way to diversify, especially if your portfolio is heavily leaning toward stocks and bonds.
When To Sell Gold
- Prices are at their peak: You could capitalize on a good return when you buy gold at its peak price. This could be a great move, especially if you bought at a significantly lower price.
- Rebalancing your allocation: If your portfolio is heavily invested in gold, then it may be time to allocate some of your dollars to other assets.
4 Common Mistakes To Avoid With Gold Investing
Gold can be a good way to invest, but you’ll want to avoid these common mistakes.
- Overallocating gold in your portfolio: Gold should be a part of your portfolio, not all of it. It’s not an asset typically associated with growth, so only invest in it as a small part of your portfolio.
- Neglecting additional fees: Gold often comes with costs like premiums, dealer fees, insurance and storage costs.
- Not checking the authenticity of gold: Make sure you buy your gold from a certified dealer.
- Falling for scams: Do not fall for unsolicited phone calls trying to sell you gold, high-pressure sales tactics or offers involving loans to finance gold purchases.
Final Takeaway
To diversify your portfolio, many experts recommend allocating just 5% to 10% to gold. You can invest through physical gold, ETFs, mining stocks or futures, but it’s important to understand the risks, especially when buying physical gold. Used wisely, gold can help protect your portfolio during market volatility and political uncertainty — just be careful not to let it take up too much space in your overall strategy.
Gold Investing FAQ
Got questions about gold? Here’s everything you need to know before you invest.- What's a good amount of gold to own?
- Financial advisors recommend that individuals have a small part of their portfolio invested in gold. For some, this amount may be 5% or 10%, for others, it may be closer to 20%.
- How much gold can I legally own?
- In the United States, there is no legal limit to how much gold you can own.
- How much gold should I own for retirement?
- There's no one answer that works for all investors. Consider your income needs, tax situation, risk tolerance and investment goals as you allocate your portfolio assets.
- Can I make money day trading gold?
- Probably not. Unlike stocks, which you can buy and sell instantaneously, it takes time to transfer ownership of a physical object like a gold bar. You can, however, day-trade gold-related stocks — if you have a high-risk tolerance and can afford to take a loss.
- What is the best way to buy gold for a beginner?
- The best way to buy depends on the investor. If you want to hold physical gold, purchasing from a reputable dealer might be the way to go. Otherwise, gold-related stocks and funds can give you exposure to gold without the hassle of storing it.
- How do I know if my gold is real?
- To find out for sure, take the piece to a jeweler or licensed dealer or appraiser.
Elizabeth Constantineau and Daria Uhlig contributed to the reporting for this article.