Gold is always a valuable asset in your investment portfolio. As your portfolio evolves and you reach different life stages, your reasons for buying gold and how much gold you should have will change. You also have to respond to the market, too, not just your own position. Too little gold means you could be risking too much or actually losing money as you rely on bonds. Too much gold could mean a high opportunity cost, putting money in gold that might be better off in a higher growth investment.
Below you’ll find a simple explanation to the role gold can play in your portfolio at three different life stages: when you’re just starting out, when you’re at mid-career and at peak earnings, and when you’re retired.
Scenario 1: You’re Young with a Small Portfolio
Growth, growth, growth. When you’re young and have limited investments, it’s easier for you to bounce back, so investors encourage higher risk portfolios. That means more exposure to stocks that will appreciate faster but also come with a higher risk of declining.
Generally speaking, with a growth-oriented, higher-risk portfolio, you should probably be looking at a smaller percentage of gold, from 5 to 10 percent, but during a stock market collapse, you should easily be looking at 10 to 20 percent. Reducing stocks and increasing gold will help your portfolio recover. Another time to move toward 20 percent is when bond yields are low or even at negative real returns. That’s when you should reduce bonds and focus your conservative investments on gold.
Now is also a great time to buy gold as part of an RRSP through a company like Silver Gold Bull. It will reduce your tax bill now and save you taxes on disposition. Find out more about investing in gold as part of your RRSP at Silvergoldbull.ca and what a difference it makes. Gold shouldn’t be the first investment you make, but don’t leave it out even from your early strategy.
Scenario 2: Mid-career with a Growing Portfolio
Retirement is on the horizon and this is what you should keep your eyes on. In a few years you’ll be worrying whether or not you have enough. However, this is also the point in your life when you have probably already made major life purchases like your home. At this point, 10 to 20 percent of your annual income is investable and you can rapidly increase your savings. This is known as the “consolidation phase” and it’s also your peak earning years.
This is also when gold becomes important as your insurance policy. You may be keen to grow your portfolio as quickly as possible, but the stakes are higher as you approach retirement and you can’t afford to lose. You need to move toward a balanced portfolio that manages risk with growth. The exact percentage of your portfolio in gold should depend on the state of the stock market (are prices volatile?) and how risky your investments are.
Scenario 3: Retirement Portfolio
At this stage, you should have two goals with your portfolio: income and wealth preservation. You’ve achieved the growth you needed to achieve and now you want to move toward a risk-averse portfolio. When it comes to income, any fixed income asset like ETFs, bonds, and money market funds will be reliable bets. But you also need to take steps to make sure that a financial crisis won’t wipe out your retirement savings. You can spend decades of your life building a retirement portfolio so that you can live in comfort, only for events out of your hands to wipe it away. Be prepared for the worst and maintain 10 to 20 percent of your portfolio in gold and silver. This is also the time that you can start selling gold you bought as part of your RRSP. If you did not buy gold as part of your RRSP, you will have to pay taxes when you sell. Keep your receipts when you buy gold when you’re younger. Investors tend to hold onto gold for so long they forget the price they paid when they calculate gains.
This is just a rough guide to investing at different stages of your life and your career. Gold has its place in any portfolio at any stage. One of the keys to successfully investing in gold is keeping your costs down. Compare premiums and storage costs before you start buying gold bullion. You can look online starting with companies like Silver Gold Bull to find out about premiums and allocated storage.
Gold belongs in every modern portfolio. It’s your insurance policy and at some point, it will also be your life boat. You won’t be able to get through life without dealing with losses to your portfolio. Recessions, which are often accompanied by stock market corrections, are inevitable. Financial success is often defined by how your portfolio recovers. Gold can help you get back on track.