A 5‑Year Roadmap to Adding Gold to Your Retirement Portfolio
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Young investors may not think about buying gold, but the asset can become a valuable part of your portfolio as you get closer to retirement. Gold offers a hedge against inflation and has long been considered a safe haven when global uncertainty rattles markets.
Although gold offers perks that you won’t find in the stock market, that doesn’t mean you should aggressively sell off assets and put all of that cash into gold. But it does mean you can consider accumulating gold gradually to help diversify your portfolio. This five-year roadmap can help you build up your gold holdings the right way.
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Learn about gold investing
In your first year, learn about gold as an asset and the different ways you can invest in gold. The price of gold can be volatile and doesn't always go up, but it can serve as a valuable part of your portfolio that can minimize losses when the stock market drops.
While physical gold is an option, it’s often more convenient to buy gold exchange-traded funds (ETFs). These funds track gold prices and can offer the same upside potential as physical gold — but you don’t have to worry about storing physical gold or having insurance for your precious metals when you buy shares of ETFs. Gold ETFs can also be more affordable and more liquid than physical gold.
Learning about gold will make you feel more confident about investing in this asset. Without high confidence in your investments, it’s easy to sell during market corrections or during cycles when the stock market rallies and gold stays flat or declines.
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Start by investing a small amount
Over five years, it's best to invest small investments in increments instead of making dramatic moves. Investing $100 into gold each month, for example, is a form of dollar-cost averaging that can grow your portfolio over time. Just keep in mind that your actual position may have higher monetary value if gold continues to rally as you buy.
Dollar-cost averaging may be easiest with a gold ETF such as SPDR Gold Trust (GLD) or iShares Gold Trust (IAU). Both funds act as gold trusts that have low expense ratios and high liquidity.
Investors can gradually boost their monthly gold investments as they feel more confident about the asset, and if adding more gold aligns with their long-term financial goals. It’s a good rule of thumb to aim for no more than a 5% to 10% allocation to gold in your portfolio, but you don’t have to rush to that benchmark. Investing $100 per month and gradually building that amount over five years can help you reach an optimal gold allocation by the time you retire.
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Rebalance regularly
Investors who value portfolio diversification rebalance their holdings regularly, such as once a year. They trim some of their top-performing assets and use the funds to buy dips on some of the underperforming picks that have strong fundamentals. This type of rebalancing gives investors the opportunity to buy more gold if it’s taking up just a small amount of their portfolio.
Rebalancing helps ensure that you aren’t taking too much risk, and are regularly considering your time horizon, financial goals and risk tolerance. It’s a good practice to rebalance your portfolio semi-annually or annually, even if you are not interested in buying gold.
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Adjust your strategy as needed
Investing strategies are not meant to be set in stone. You should modify your portfolio and adjust your long-term goals based on how your needs change. For instance, young investors may be more eager to take risks since their portfolio has time to recover from market downturns, but those same individuals tend to get more cautious as retirement draws closer.
You can monitor your gold holdings each year and assess if you are putting the right amount of money into this alternative asset or if changes are necessary. Some investors may believe that $200 per month is more optimal after reviewing their first-year results. Other investors may feel the need to trim their gold holdings after a big rally.