Avoid Gold‑Buying Regrets: 10 Beginner Mistakes First‑Time Buyers Make

Buying gold can be a good way to diversify your portfolio, especially if you want to hedge against inflation and stock market uncertainty. However, making a few beginner mistakes when investing in gold can introduce unnecessary risk and potentially hurt your long-term returns.

For instance, some retirees may regret investing too much money into gold too quickly.

This mistake and others are easy to avoid. Read on for the mistakes you should look out for and how to avoid them.

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Mistakes around timing, allocation and more

While adding precious metals to your portfolio comes with benefits, it’s important to understand both the pros and cons before investing. You should also ensure buying gold aligns with your risk tolerance, goals and time horizon.

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As you get started, here are 10 mistakes to avoid:

1. Going all in after a scary headline: The stock market is filled with short-term noise, and it’s important to stay focused on the long-term picture. Headlines can make investors more prone to emotional decisions that hurt their long-term returns.
2. Buying too much too fast: You don’t have to get all your exposure to gold right away. Gradually building your position over time and setting limits on how much gold to include in your portfolio can make investors less susceptible to this mistake.
3. Ignoring how gold fits the overall plan: Gold is just a small piece of a portfolio that typically shouldn’t take up more than 5-10% of your overall assets. Investors can speak with fiduciary advisors if they aren’t sure how much gold should be in their portfolios.
4. Selling too much gold during a bull market: While gold can act as a valuable hedge, there are some instances when the S&P 500 will rally and outpace gold. That’s not a good time to sell gold and put it into the stock market. Gold is meant to recession-proof your portfolio instead of maximizing returns. It’s natural for gold to fall behind the stock market during some cycles, but that usually doesn’t warrant exiting gold completely.
5. Choosing high-pressure sales outfits: A gold seller shouldn't include an artificial deadline in the sales pitch or aggressively prompt you to buy gold. Research gold providers before buying from them.
6. Not understanding fee structures: Gold individual retirement accounts (IRAs) can have excessive fees that make it more beneficial to use a traditional IRA and buy shares of a gold exchange-traded fund (ETF) instead. Before committing to any gold provider, check their fee schedule so you know the costs.
7. Buying collectible coins: Gold investing can be complicated — and purchasing collectible gold coins can add to the complexity. There are plenty of variables that determine the value of these coins. It’s often simpler to buy grams or ounces of gold or opt for a gold ETF instead of physical gold.
8. Storing large amounts at home without security: It’s possible for gold at home to be lost, stolen or damaged.
9. Losing key documentation: Losing vital records about gold can cause potential buyers to question its authenticity when you want to sell it. Investors should organize their documents so they can verify that any piece of gold is legitimate.
10. Misunderstanding IRA rules: Not only do gold IRAs often have high fees, but they also have different rules around storage. You are not allowed to store physical gold that is part of an IRA in your home, for instance. Be sure your fully understand the IRS’ rules before investing.

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