Gold has long been viewed as a potential way to add diversification to an investment portfolio, but for someone new to investing in precious metals, deciding how much gold to own can be challenging.
In a recent Business Insider article, “How much gold does a beginner actually need? An expert weighs in,” journalist Kit Pulliam explores where gold may fit within a diversified portfolio, how much investors might consider holding, and why gold is generally better suited to a long-term strategy than a short-term investment opportunity.
Our Chief Investment Officer and CEO, Steven Rogé, shared his perspective on the role gold can play as part of a broader investment strategy. Steven emphasized diversification as one of the foundations of long-term investing. Different investments can respond differently to changing market conditions, and gold has historically behaved differently from stocks during certain periods. Including investments with varying characteristics can help investors avoid becoming overly dependent on the performance of one asset class.
He also drew on lessons from the technology bubble early in his career, when he watched investors concentrate heavily in popular technology stocks and suffer significant losses when the market declined. The experience reinforced the importance of building a portfolio around multiple asset classes rather than chasing whichever investment happens to be performing well at the time.
When it comes to how much gold to own, Steven explained that the appropriate allocation depends on an investor’s individual goals, time horizon, risk tolerance, and overall portfolio. For a beginning investor with a long-term focus, stocks would typically continue to make up the majority of the portfolio, while gold could represent a smaller allocation within long-term assets. In the example discussed in the article, that could translate to as much as roughly 12% of the overall portfolio.
Most importantly, Steven cautioned against viewing gold as a way to capitalize on short-term price movements. Its potential value comes from the role it can play within a thoughtful, diversified, long-term investment strategy.
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R.W. Rogé & Company, Inc. is an independent, fee-only financial planning and investment management firm serving clients locally and virtually across the country, with Long Island, New York, and Beverly, Massachusetts office locations. R.W. Rogé & Company, Inc. was founded on a “client first” culture and proudly commits to acting in your best interest as a fiduciary. We have helped clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, as well as our process, explore our detailed overview of services and approach.
