Investing in precious metals, particularly in gold, is a great way to hedge against inflation.
It’s been a valuable commodity since ancient times, and it still has intrinsic value until today.
Investment gold is money itself and has industrial uses as well. But is it always safe to invest in gold?
Gold As An Investment Safety Net
Gold prices have been on a see-saw historically, and that’s a common thing because that’s what the economy does to various types of assets.
It’s not always a winning situation for gold holders. But even though prices are fluctuating, it’s here to stay, and here’s why:
In general, gold is just about as good as an asset that you can add to your portfolio. Like any asset, it’s not a foolproof investment, and the market price is still as volatile as it can get.
Even Warren Buffet thinks gold is not as useful because it doesn’t produce dividends. But why buy gold anyway? The main reason is that it makes an excellent store of value.
While the value of gold is not as lucrative as stocks and bonds, the precious metal protects against inflation and economic instability. It’s just one asset you can keep as a retirement commodity and won’t eat your other investments.
The value of gold typically rises amid a low economy. For instance, its value reached past $2,000-mark last July, but it fell right back at USD$1,800-mark.
Still, experts are expecting gold to rise to USD$2,500 per ounce this year. So, while the market remains volatile, it still shows promise for the long-term.
2. Long-Term Investment
Some would compare investing in gold for investing in stocks and bonds. From 1990 to 2000, gold increased in value to 36%. Stocks went up 991%, but this is during a 30-year period. If you’re to look at it at a 15-year period, gold rose to 330% and the other at only 153%.
The value of gold fluctuates, but prices are slightly higher than corporate bonds. Still, the price depends on multiple factors playing out in the global economy.
It’s still the asset that experienced investors can hold onto a bit longer. Experts believe that people see it as protection more than anything else because of the current economic turmoil.
No matter what happens, people still have something they can quickly liquidate when push comes to shove.
How Much Should You Invest In Gold?
Every savvy investor knows that it’s detrimental to spend your money in one asset class. Diversification is always a golden rule to protect yourself from losses.
For every new investment that you come across, it’s better to research about it first before spending your hard-earned money on something you can’t manage.
Investors who have 2% to 10% of gold in their portfolio can expect a steady return. Even if you have a high-risk tolerance, it’s better to hold off on too much gold in your portfolio to make way for other asset classes that can also be beneficial.
What you want is long-term stability.
If you still want to own gold as part of your portfolio, it’s an asset worth looking into as long as you understand that its value is not always steady.
There’s no such thing as a perfect investment. If anything, flaws in the economy make you learn how to be careful.
While some may doubt gold’s continued value, it’s still a great diversification commodity for long-term financial goals.