Why gold still shines in modern portfolios

Investors have been turning to investors for centuries Gold as a safe haven during economic turmoil. The precious metal has a proven track record of wealth preservation and portfolio performance. But in the age of cryptocurrencies and tech stocks, some question whether gold still has a place in modern portfolios.

Although gold is often viewed as an asset for traditional investors, it continues to provide valuable benefits in today's fast-moving markets. His ability to do so hedge against inflation and diversification of risk continues to attract experienced and Beginner investors.

We asked financial experts to share their thoughts on gold's role in modern portfolios. Your insights could change your view of this timeless asset – and your investment approach.

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Why gold still shines in modern portfolios

Contrary to what some may believe, gold isn't just for older investors or the super-rich – it fits into almost any portfolio. “People often don't know they can buy gold…they assume it's only for the rich.” [But] “Anyone can buy gold in affordable quantities,” says Brett Elliott, marketing director at American Precious Metals Exchange (APMEX).

This accessibility has kept gold relevant, but its appeal goes beyond mere accessibility. Throughout financial history, the precious metal has always been a store of value and has adapted to different economic conditions.

David Weild, chairman and CEO of Weild & Co., points out that “gold-backed bearer bonds” were issued in the mid-19th century. “These were fixed-interest securities that promised repayment [bondholders] in gold instead of currency,” he explained. They became popular when inflation was high – similar to how investors today use gold to protect their assets when economic uncertainty looms.

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Gold: A strategic instrument for protecting against inflation and diversifying risk

Elliott highlights two key reasons why smart investors might invest a portion of their portfolios in gold today: Inflation protection And Risk diversification.

Gold prices only tend to rise over time, as evidenced by the record price rise so far in 2024, despite concerns about inflation, interest rates, and more. This demonstrates gold's ability to maintain purchasing power over long periods of time, often outperforming inflation.

If you don't mind the storage aspect and low liquidity, physical gold can provide security in a portfolio. “[It] “There is no counterparty risk,” notes Elliott. Unlike many other assets, including government bonds, physical gold poses no risk of default. Therefore, the precious metal often performs better when other assets are under pressure – making it a great portfolio diversifier.

Popular types of gold for today's investors

Are you thinking about investing in gold? Tangible Gold coins and bars are not your only options. Below are four other popular ways to add the precious metal to your portfolio, each with crucial considerations:

• Gold Exchange Traded Funds (ETFs) Track gold prices and trade like stocks. They are easy to buy and sell without the need to store physical gold. The downside is that you are exposed to counterparty risk and may have to pay administrative costs.
• Gold IRAs are retirement accounts that hold gold instead of stocks or bonds. They offer tax advantages for long-term investments, but come with special rules and setup fees. A serious one Gold IRA companies can help you set up and manage these accounts. Find out more here.
• Gold mining stocks offer the opportunity to achieve high returns by purchasing shares in gold mining companies. However, company performance adds even more complexity as it influences stock value in addition to the price of gold.
• Gold futures are contracts to buy or sell gold at a set price in the future. They enable leveraged investing, but are complex and involve a high level of risk.

“I prefer clients to invest in a gold ETF,” says Laura Casey, managing director at Coastal Wealth Management. She prefers this type of gold due to lower fees and better tax management options (compared to mutual funds).

The end result

The enduring value of gold in modern portfolios is clear, but how you invest in it is important. As we've already explained, each type of gold investment has advantages and disadvantages. So before you take any steps, sit down with a financial advisor. They can help you determine the best type of gold for your portfolio and how much you should buy. Your advisor can also explain how this could affect your taxes and overall investment strategy.