Gold has long been considered an important part of a diversified investment portfolio. It is particularly attractive as a hedge against inflation and a means to preserve wealth over the longer term. It is also a stable asset that has held its value through periods of geopolitical uncertainty and economic turmoil.

Investors can add exposure to the precious metal through various vehicles, such as physical bullion or coins, exchange-traded funds (ETFs) or buying shares of companies that extract and refine it. Each method carries risks that investors should consider carefully.

For example, investing in physical gold involves owning a tangible asset that requires securing and insuring. ETFs like SPDR Gold Shares, iShares Gold Trust and abrdn Physical Gold Shares ETF (GLD) are more flexible ways to own the metal and may allow you to diversify your portfolio with less volatility than owning physical bullion. However, these investments also carry the risk of a decline in price, and their fees can add up quickly.

In addition, owning the metal does not provide any cash flow, requiring you to rely on someone else paying more for it than you did in order to make a profit. By contrast, owning stocks provides a steady stream of income from the company’s operations. Some investors use gold savings plans to increase their holdings through small, regular contributions over time. This “dollar cost average” effect can reduce your vulnerability to price fluctuations and may even help you achieve other financial goals, such as wealth building or retirement savings.

The demand for Gold as an investment is often tied to worries about geopolitical instability or a global pandemic, which can drive the price up in anticipation of a crisis. It is also popular during periods of economic uncertainty and volatility, when many traditional investment options are under stress.

One of the key benefits of Gold as an investment is that it holds its value over time, unlike most major currencies. This gold investing tips shows that it makes gold a valuable asset to own as a hedge against the erosion of the purchasing power of other assets, such as stocks and bonds.

Gold is also a good diversifier, helping to reduce the risk of loss in volatile markets or when the economy faces an upswing. Gold typically rises in value when traditional investments fall, and historically has performed well during times of high inflation.

However, adding too much of it to your portfolio can hold back the gains you would get from stocks and bonds. As such, most advisors recommend limiting your allocation to about 10% of your overall assets. In addition, speculative gold-related investments such as futures and options contracts should only represent a very small portion of your portfolio. Investors should seek the advice of their own financial planner before making any changes to their investments. Request a free information kit today to learn more about the benefits and drawbacks of Gold as an investment.