Gold and It’s Place in Your Portfolio
A Brief Overview of Gold
Gold is one of the oldest known forms of currency with the first gold coin being struck around 550 BCE in what is today considered Asia Minor. Throughout history it has been used as a store of value, a medium of exchange, as well as a unit of account. It has economic and utilitarian value and during times of turmoil it has been seen as a safe haven by investors. Gold has been used on and off as a currency and display of power/store of value going back over multiple centuries to date. It was used as a currency or show of status by multiple early civilizations including but not limited to the Byzantines, Romans, Aztecs and Incas. This is because of the precious metal’s rarity, malleability, durability, beauty, and in the case of certain early American civilizations, it’s close semblance to the sun. Throughout more modern history different countries at different points have tied their currency to gold, meaning that one note of said currency can be exchanged for a certain amount of gold at any given time. The United States most recently adopted a gold standard post World War 2 as part of the Bretton Woods Agreement and stayed on said standard until 1971. The Swiss Franc was the latest and last major currency to be tied to gold ending its run in 1999. Gold historically has a low correlation to equities and bonds making it a great way to diversify your portfolio.
Different Ways To Own Gold
There are different investment vehicles allowing you to track the price of gold. ETF’s are one of the most simple and cost effective ways to track the price of gold with some physically taking possession the asset itself. You can also own gold the old fashioned way by owning the physical metal itself. Some different types of physical gold you may have heard of are bullion (gold bars), proofs(gold coins with prints on them), and of course jewelry. For this articles sake, when we refer to owning physical gold we will be thinking of bullion. Gold bars kept in their packaging can be bought and sold online at sites such as jmbullion.com or at physical gold exchanges which can be found locally to you with a quick google. Depending on the amount, physical gold can be cumbersome and lead to you paying relatively high commissions. In addition, you will also need a safe place in which to store it. Bullion does offer a degree of protection and diversification as it is something that you physically have in your possession, other than cash, that is typically thought of as an inflation hedge.
How Much Should I Own?
Is gold it right for your portfolio as a retail investor? If so, how much exposure should I have to the shiny metal asset? These two questions should be answered by asking yourself other questions. What is my risk tolerance? What is my investment time horizon? What are my investment goals? How would owning gold effect my current allocation? For more information on gold, it’s place in your portfolio and some of the best ways to get exposure to it, please schedule a meeting with an investment advisor representative using the contact page on our site or clicking here.
Gold Can Outperform During Times of Uncertainty
This Investopedia article offers a fair view of golds performance over more recent years as well as additional insight on the metal. Gold historically has a low correlation to equities and fixed income markets. Currently, as of writing this article Blackrock’s ETF, IAU, has a 5 year monthly beta of .32 (as shown on yahoofiance.com). A beta of 1 represents a perfect correlation to the S and P 500. A beta of .32 means the investment has been 32% as volatile as the S and P 500 index.
Disclaimer: This blog post is meant for purely for general educational purposes and does not represent investment advice made by Conviction Wealth Management LLC. Conviction Wealth Management LLC. is a Registered Investment Advisor in the State of New Jersey, Investments inherently have risk of loss and past performance does not guarantee future returns/performance. For an investment recommendation please consult an investment professional.
