The question about how much gold and silver should be part of a portfolio has dogged investors for more than a century. After all, there are no greater stores of actual value than precious metals like gold and silver.
However, the true answer to the question is as personal as they come. Every investor has their own goals, their own tolerance for risk, their own perception of the political and geopolitical status of the economy, and their own opinions about the long-term viability of fiat currency.
We are not financial advisers here at JM Bullion. We cannot tell you the “correct” portion of your portfolio to construct with precious metals like gold and silver. Instead, we are going to investigate the details of both the pros and cons of buying, owning, and investing in gold, silver, or other precious metals. We are also going to discuss the trend of gold ETFs and how investing in those vehicles compares to buying the actual metals.
If you’re still on the fence about how much gold and silver you should own, read on. Hopefully, we can inform you to make a decision and move forward with your investment goals.
We know what you’re thinking. You’re thinking that there’s no way you’re going to receive a balanced set of information about buying precious metals from an online precious metals dealer like JM Bullion.
From the outset, however, we want to stress the fact that buying gold and silver is not always a perfect investment move for everyone. In fact, there are likely times that even the most bullish stackers might throttle back on their acquisitions of rounds, coins, and bars.
Even though we obviously think that gold, silver, and the rest of our metals are excellent investments overall, we want to make sure that you are buying them (or not) with your eyes wide open. They’re fabulous investments to make, but they are not perfect or without downsides.
Let’s begin by discussing the positive aspects of owning gold and silver. Whether you are an experienced investor, a bit of a novice, or simply a person with a passing interest in owning precious metals, it’s a good idea to bear all of these different attributes in mind as reasons to consider beginning or increasing your investment:
As much as gold and silver are excellent investments, they are not always the right choice for everyone. In some cases, life situations make investing in precious metals a less prudent concept. Like all investments, buying gold and silver is a matter of timing, and it simply may not be your time to buy. Here are some reasons why you might consider waiting on a gold and silver investment:
We don’t think so, but we can understand the allure.
Gold ETFs, or gold exchange-traded funds, are investment vehicles that have exploded in popularity in recent years. Simply put, a gold ETF is a fund that sees its value increase or decrease with a heavy correlation to the price of gold. In other words, the value of the ETF is largely determined by the overall value of the metal itself.
Because they are investment vehicles, however, they offer a few advantages and/or counters to some of the downsides of physical metal investment we mentioned above. For one thing, you don’t have to purchase in expensive lots, necessarily. For another, you can trade your shares more readily than you can physical gold, and there’s no real life component that you need to handle.
However, we caution against gold ETFs as a substitute for physical gold because you’re not actually able to take physical delivery of your gold assets purchased through an ETF. At the end of the day, you still suffer from the same default and third-party risks (like governments and central banks) that any other types of investments do. In theory, an ETF’s value could drop to nothing or the ETF itself could go bust, although it’s quite unlikely.
When it comes to our money, though, we know that gold’s value can never be zero or go bust, even if the world crumbles around us. If we’re going to the trouble of adding gold to our portfolio, anyway, we might as well have something that actually exists.
The first thing to say about this question is to reiterate that we at JM Bullion are not financial advisors by any means. We are not qualified to give you any definitive answers about your particular situation, and – frankly – we’re not sure we would want to do so if we were.
Financial professionals themselves are all over the map about the “correct” percentage. We have observed recommendations for 1%, and we’ve seen suggestions for 20%. The presence of such a large spread means nobody is terribly certain, and the volatility of precious metals may change the answer over time, anyway.
The best thing to do is consider your answers to a few questions:
Most importantly, you need to have a firm, clear, and decisive answer to this question:
Why am I buying Gold and/or Silver?
If there’s a legitimate money-based reason that you have in mind, it might make sense to allocate a significant percentage. If it’s more emotional, then you may want to err on the side of caution and keep your exposure small.
So, do your homework, talk with your family, and make as rational a decision as you can. Then, always bear in mind that nothing is set in stone. In fact, the whole reason gold and silver are available is because they are no longer set in stone. Happy investing!
We are not financial advisers and, as such, we recommend that anyone looking to allocate precious metals to their portfolio do their own thorough due diligence and research and draw their own conclusions. In addition, we recommend that one discuss the pros and cons of such investments with their financial adviser or professional.