How much gold should you own?
Before you start buying gold, the first question you’ll ask yourself is: how much? What is a good amount of gold to buy? What percentage of my savings should be in gold? Should I have the gold delivered home?
Those are all important questions, but the truth is: it depends on your goals. Most investment gurus will recommend having anywhere between 4 to 20% of your portfolio in gold – that’s a large gap!
Before buying gold, it’s good practice to ask yourself why you are buying the precious metal and what your main objective is. Below are three examples of goals that are appropriate when investing in gold (you can have several at once)!
3 examples of gold goals:
To beat inflation
If you leave your money in a savings account, your money is slowly losing value every year. On average, inflation sits at 2% every year. That means your money is losing 2% of its value annually. That may not seem like much, but over the years that small percentage can really add up.
By investing in real physical gold, your savings will beat inflation. In 2010, gold was at $1,113 per ounce, and increased to $1,520.55 at the beginning of 2020 – that’s an increase of 36.6%! If you had left your money in a cash account, your money would have lost its value. By investing in gold, not only are you beating inflation, but you are actually increasing your overall returns.
In order to beat inflation you’ll also want to make sure you are paying the lowest fees possible, since fees can quickly eat up your investment return. Make sure to do your research and pick one of the cheapest gold dealers on the market (hint: Minted!).
To diversify your portfolio
You’re likely already investing in stocks and bonds through your own stock broker. Securities will offer a higher return and grow your money year over year. But what happens when there is a stock market crash, or dare we say recession?
Diversifying your portfolio means your money takes less of a hit when the stocks and bonds decrease in value. Historically, gold increases in value when stocks and bonds decrease, making gold a great way to diversify your portfolio. In 2008, stocks decreased by 20% – initially, gold decreased too, but it then increased by over 30% in 2011. The same happened in 1973, when gold was increased by 73.49% while stocks and bonds were crashing.
In the long term, gold is a great way to diversify your portfolio. This is also because gold is a precious metal that has inherent value and has been used as a store of wealth for centuries.
To leave some money out of the monetary system
Gold bullion and gold coins are a very special type of investment because you can literally hold them in your hand. This is not the case for most of the money out there: even the cash that sits in your bank is based on a promise.
By holding some of your investments in gold and silver, you can rest assured you will always have something that holds value, even if the international monetary system crashes or currencies are devalued.
Gold holds intrinsic value; the fact that banks have been increasing their reserves of gold over the years is proof that this holds true. For this reason it’s always wise to hold physical bullion gold rather than gold stocks.
Most gold dealers hold their gold bars in kilos of gold; this means they need to smelt it and fabricate it into smaller bars in order to deliver. At Minted, we only buy 10 gram bars of gold, which means that you truly own what you buy. The second you want your gold delivered, we send it out to you through the Royal Mail.
How much should you own?
Now onto the big question: how much gold should you own?
The main things to keep into account when deciding how much gold bullion to buy is what your main objective is, what your risk tolerance is and how exposed you are to the ups and downs of the economy.
If you are aiming to beat inflation, then simply putting some of your liquid cash into gold would be a good idea: most advisors recommend starting with 4% of your portfolio.
If you are looking to diversify your portfolio in order to reduce risk and volatility, investors usually set 10% of their portfolio to physical gold.
Finally, if you are looking to keep some money safe and separate from the international monetary system, the amount you should set aside depends on how long you want to be able to live off your own reserves. Think of it in terms of months – most people recommend having emergency savings of 6 months of expenses in cash. Once you have built up a cash reserve of 6 months, consider creating a separate emergency pot with gold that will last you several months.
If you’re new to gold and not sure where to start, consider starting with the lowest amount we offer: £30. By signing up to Minted’s monthly savings plan, you can contribute as little as £30 every month with no contracts, no minimum deposits or additional fees. And as a thank you, we also offer the first year of insurance and storage for free!
At Minted we do believe that gold has a place in every investor’s portfolio. Deciding how much to allocate to gold is a very personal choice, and that’s why we wanted to offer the lowest amount possible to help people make a decision. With Minted, you can buy gold with no contract, no joining fees and no commitments. The second you decide you want to sell your gold, we will buy it back from you at better rates than the high street.