It’s an important question — probably one of the most frequently asked questions I ever get on this website. What percentage of your portfolio or net worth should be in gold?
The answer, like the answer to most investing questions, is dependent on one’s views regarding economics. If you believe that it’s very likely that hyperinflation will hit the world, then you’d obviously want to prepare a little differently than if you think hyperinflation is impossible.
My answer will simply assume my beliefs regarding the economy: that a gradual economic decline is inevitable, and an economic collapse is possible but unlikely.
What Percentage of Your Net Worth Should be in Gold?
Roughly 10-20% of your financial portfolio should be in gold and silver. The reasoning for a 10% or 20% chunk is simple: if inflation hits, you’ll have enough in reserves to at least function better than most. If hyperinflation hits, you’ll be able to recover at least a good portion of your losses.
Once currencies begin to melt away, gold will be much higher than it is right now. If gold is 5x the value of what it was when you purchased your gold, and you put 20% of your assets in gold, then you’ll recoup your losses for the rest of your portfolio — if not more.
What About Silver and Platinum?
This goes for precious metals in general — with a special emphasis on silver and platinum. Metals in general are a good call, and that especially goes for silver. Silver prices haven’t picked up speed nearly as much as the price of gold, so there’s probably even a little extra room for growth.
As far as platinum, I’ll be writing a bit more about it in the future. Suffice it to say when it comes to preparing for wide-spread inflation, metal trumps paper.
What Kind of Gold? What About Mining Stocks?
I’ve made it pretty clear that I’m a huge fan of mining stocks. I even put together Learn Mining News specifically about mining stocks and investing. I’m even in the middle of creating a free mining stocks course.
But when it comes to preparing for inflation and financial security, I don’t put mining stocks in the same field as gold coins. Gold and silver coins are physical — mining stocks are still mostly paper. I mean, sure, the mines are real — but your ownership is less obvious and easier to prove than having a sack of silver and gold.
Call me paranoid, but if things get bad I want my wealth to be in a safe — not pieces of paper saying I have claim to a mine out in South Africa that I’ve never seen before. Bullion coins are just more secure.
That isn’t, of course, to say that I’m not a fan of gold mining stocks — but gold mining stocks should be seen as investments for the sake of profit, not investments for the sake of security. The two are often very different.
Remember, if you have any questions, use the contact form to ask away.
Tags: FAQ, gold, how to invest, net worth, portfolio