Gold is often viewed as a store of value and can help stabilize portfolios during times of inflation or market volatility. But how much gold should you have in your portfolio? And is it even necessary at all?
Experts tend to recommend investors hold between 0% and 15% of their portfolio in precious metals
, with gold typically making up the largest share. A common starting point for moderate buyers is 5%.That said, there’s no one-size-fits-all approach to investing in gold. How much you should personally own depends on your investing timeline, risk tolerance and goals. Here’s what you need to know before you decide.
How much gold should I have in my portfolio?
According to experts, a balanced portfolio may allocate between 0%
and 15% in precious metals, with most of this allocation being in gold.
“A common starting framework is 5% to 10% in precious metals,” says William Connor, CFA, CFP and partner at SAX Wealth Advisors. This level can improve portfolio diversification without significant sacrifices to long-term returns.
Recommendations can also change alongside the larger macroeconomic environment. “Historically, the recommended standard portion allocated in precious metals was 2% to 5%. Following price surges and increasing economic uncertainties, this number has increased to 10% to 15%,” says Leo Chen, professor at the University of South Florida’s Muma College of Business.
Ultimately, how much gold you hold also depends on your individual goals, risk tolerance and investment timeline.
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How to decide how much gold to own
Although there are general guidelines around how much gold to own, there’s no one-size-fits-all approach. “The final percentage should be driven more by risk tolerance, inflation concerns and portfolio objectives than by age alone,” says Connor.
To decide how much gold to own, focus on your goals, timeline and the overall market.
Start with your goals
When choosing a gold percentage, you must consider how gold fits into your broader portfolio strategy. Are you prioritizing growth, diversification or wealth preservation?
Gold can help diversify a portfolio and potentially reduce overall volatility. Because gold often moves differently than stocks and can can hold up well during market stress, it’s also a key portfolio diversifier.
That’s why strictly growth-focused investors usually don’t prioritize holding gold, while investors focused on stability and capital preservation often do.
Consider your timeline
Your age and investment horizon can also influence how much gold you should own.
“Younger investors generally have a greater ability to withstand volatility and longer recovery periods. Therefore, they benefit more from equities rather than larger allocations for precious metals,” says Chen.
Robert R. Johnson, PhD, CFA, CAIA, professor of finance at Creighton University's Heider College of Business, agrees. “The tradeoff between slightly dampened volatility and the lost long-term return is certainly not a prudent one, particularly for Gen Z/millennials with long investing time horizons,” he says.
On the other hand, investors nearing retirement may prioritize wealth preservation over long-term growth. Gold could help diversify their portfolios, although it can still experience significant price swings.
Factor in your risk tolerance and market concerns
Investors who are worried about high inflation, currency instability and geopolitical conflicts naturally gravitate toward gold, as it is a “safe haven” asset that has historically held value amid market volatility. “The metal has particularly performed well during economic drawdowns, exhibiting low or even negative correlation to equities,” says Chen.
But while holding gold can help reduce portfolio risk, it can also mean missing out on higher returns elsewhere. “Gold and silver pay no dividend, earn no interest and generate no cash,” says Chen.
Bottom line: How much gold should you own?
Gold can play a useful role in a diversified portfolio, but it's not a necessity. For investors who want exposure to precious metals, a 5% to 10% allocation is a common starting point.
Investors nearing retirement or prioritizing wealth preservation may find gold's diversification benefits appealing. Younger investors with longer investment horizons, meanwhile, may prefer to focus on assets with greater long-term growth potential.
Ultimately, the right amount of gold could be anywhere from 0% to 15%, depending on your financial goals, risk tolerance and investment timeline.
FAQs: How much gold you should own
Is 5% gold enough in a portfolio?
Although it depends on your individual goals and timeline, 5% is a common allocation for gold in a portfolio. Investors who are nearing retirement or prioritizing portfolio stability may want to allocate more.
Can you own too much gold?
Experts typically recommend allocating only a small percentage of your investment portfolio to gold. That’s because, in the long-run, you can earn higher returns on other investments, like stocks, compared to precious metals.
Does gold protect against inflation?
While it’s not guaranteed, gold is often considered a protection against inflation. That’s because gold tends to hold value over time, even when fiat currency loses purchasing power.
This article originally appeared on USA TODAY: How much gold should you have in your portfolio? Experts weigh in
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