What Percentage of My Portfolio Should Be Allocated to Gold?

December 22, 2023


When it comes to investing in gold, one critical question often arises – how much of your portfolio should it comprise? 

This decision isn’t just about following a trend, it’s about strategically aligning your purchases with your long-term financial goals and objectives. Gold, known for its enduring value, offers a key benefit of diversification. This means incorporating gold into your portfolio can help mitigate risks by balancing your risk across various asset classes, including stocks, bonds, and precious metals.

Diversification is becoming more important by the day as political instability and world chaos causes massive inflation to the US dollar.

Financial Experts Recommend 10% to 30% of Your Wealth In Gold 

The ideal percentage of gold in your portfolio is a subjective decision, influenced by individual financial circumstances and risk tolerance. However, financial experts generally suggest an allocation between 10% and 30%. This range is recommended to optimize the balance between risk mitigation and potential growth.

For instance, Jerry Wagner of Flexible Plan Investments Ltd. in 2013 advocated for a 20% allocation to gold in a traditional portfolio mix of 60% stocks and 40% bonds.

On the other hand, Harry Browne, a free-market analyst, recommended an equal distribution across stocks, bonds, gold, and cash, each constituting 25% of the portfolio.

Jim Cramer of CNBC’s Mad Money, views gold as an insurance policy, suggesting a 10% allocation.

But perhaps the grandfather and leader of them all is John Exter, a former U.S. Federal Reserve Governor and Harvard economist, is known for his “10% rule” and the creation of “Exter’s Pyramid.” This model illustrates the liquidity hierarchy of asset classes during financial crises, with physical gold, considered the safest asset, forming the pyramid’s base. Exter’s theory underscores the movement of customers from less liquid debt-based assets to more liquid physical assets like gold during economic turmoil.

Exeter’s rule is one of the good ones that are easy to follow – Keep 10% of wealth in gold and other precious metals.

Tailoring Your Portfolio to Your Unique Needs

When it comes to shaping your portfolio, it’s not just about following a set formula. It’s about crafting a strategy that aligns with your personal financial situation, your comfort with risk, and how long you plan to be in the market. But it’s not just about numbers and percentages. The broader economic and geopolitical landscape plays a crucial role too. As the world changes – and it always does – it’s wise to periodically reassess and adjust your purchases accordingly.

The Role of Gold in Safeguarding Your Retirement Funds

Now, let’s talk about gold’s role in all this. Allocating even just 10% of your assets to gold can act as a safety net for your entire portfolio. This isn’t about going all-in on gold, it’s about finding that sweet spot where you feel secure and comfortable. Think of gold as your financial backup plan – it’s there to support you if things go sideways in the financial system, whether that’s a crisis that locks up other funds or a cash crunch. 

Remember, gold and silver aren’t just shiny objects – they’ve been recognized as a form of currency throughout history, offering immediate liquidity in times of need.

Why Silver Deserves a Spot in Your Portfolio

Diversifying within the precious metals space is also a smart move. Silver, for instance, is more than just gold’s lesser-known cousin. It’s a versatile metal with a wide range of industrial uses, making it an attractive purchase. But keep in mind, silver can be a bit of a wild card – it tends to have more dramatic price swings than gold. In a bull market, silver can see impressive gains, but it can also drop more sharply in bear markets. Oxford Economics suggests considering a 6% allocation to silver, adding another layer to your diversification.

The Wisdom of Diversification

By spreading your risk across different assets like gold, silver, stocks, and bonds, you’re not just hedging your bets – you’re setting up multiple avenues for potential returns while cushioning the blow if one part of your portfolio underperforms. It’s the classic wisdom of not putting all your eggs in one basket, and it’s as relevant today as it’s ever been.

If you want to protect your wealth, then you want to diversify your portfolio with Gold and Silver now.

Are you ready to protect your wealth and finally feel ready for the chaos to come?

Schedule a call with us now to answer any other questions you might have and to begin protecting your wealth. Do yourself and your family a favor and call us now.

American Alternative Assets is here to help you with a personalized, educational approach to wealth protection.

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