How Much Gold Should You Have?
Your gold holdings should depend on your financial circumstances. In an extreme scenario, an ounce could provide for food or even shelter needs.
Gold can withstand inflation, serving as an asset that maintains purchasing power over time and diversifying an investment portfolio. But investing in it comes with its own risks and expenses – such as storage and insurance costs.
How Much Do You Need?
Gold may connote luxury and high costs, but it does not need to be part of every investor’s investment portfolio. Instead, physical gold provides individuals with an efficient means of protecting wealth independent from government control or financial institutions.
Purchase of physical gold can be accomplished easily and cost-effectively by purchasing bullion coins or bars from reputable dealers at their gold content plus an added premium.
Physical gold ownership comes with certain drawbacks that make it less than ideal as an investment vehicle: selling it requires days or weeks to settle, storage costs typically represent a percentage of holdings value and being stored at home can put it vulnerable to theft requiring extra insurance protection; so investing in physical gold should only be part of a long-term portfolio strategy; alternatively investing in gold-backed ETFs or mutual funds may provide better results but may not suit everyone.
How Much Can You Afford?
By purchasing physical gold, you own it directly and can always exert control. Furthermore, purchasing physical gold offers one of the cheapest means of diversifying a portfolio.
Expert investors may trade paper assets that represent ownership of gold – such as ETFs and futures contracts – but these come with significant trading risks that can compound investment losses.
Legal tender minted bullion coins offer the most efficient means of owning physical gold. Their price reflects their actual gold content (known as their “melt value”) plus a small premium and are widely available from banks, brokerage firms, and precious metal dealers.
Home or professional storage facilities pose significant risk of theft or loss; confiscation from an authoritarian government may also arise; therefore it’s wiser to store gold abroad in jurisdictions like Switzerland and Liechtenstein that have laws protecting private property rights.
How Much Will You Need in the Future?
Gold has long been recognized as a safe haven in times of economic instability, geopolitical unrest and pandemic threat. You can invest in gold either through physical bullion or stocks; physical gold offers greater security and liquidity than securities.
Financial advisors typically recommend holding 5-15% of your portfolio in gold (or its equivalent in cash).
Physical gold can be purchased at banks, reputable bullion dealers, coin dealers and brokerage firms, usually priced by the ounce (technically the troy ounce is used) although often sold with premiums of 1-5% over its spot price. Minted coins offer legal tender status similar to paper currency but may carry higher theft risks and storage fees than holding physical gold in one’s possession.
How Much Can You Afford to Lose?
Purchases of precious metals serve to hedge against inflation; their prices tend to rise during periods of high inflation. Furthermore, buying gold adds stability and liquidity to retirement accounts or other investments.
Please bear in mind that physical gold is inelastic and cannot be sold instantly online, so you must plan accordingly. Furthermore, storage costs can drastically diminish your profits; keeping it at home exposes it to theft risks while professional storage facilities typically charge fees between 1%-5% of your investment each month.
Finding a trustworthy dealer and understanding the costs associated with investing in physical gold are both essential steps. Avoid boiler-room telemarketers who lack any professional experience or registration to provide trading, investment or tax advice. Keep track of purchases, market value and associated expenses using financial software or spreadsheet to identify expenses as quickly as possible in order to maximize gains during times of market instability and economic distress.
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