How much of your portfolio should be precious metals?

Deciding how much gold and silver to keep in your wallet should be a personal decision. Generally speaking, investors invest between 10 and 15% of their wealth in precious metals. The part of your portfolio that you dedicate to precious metals will depend on your sensitivity to risk. In general, we advise our clients that between 5% and 15% of their portfolio be dedicated to precious metals.

The research showed that the “sweet spot” for the percentage of gold in the portfolio is 20%. In the long term, this provides the best balance between risk and reward. Investors may not realize that a wide allocation of commodities may not provide sufficient exposure to precious metals. Most major commodity indices have precious metals as the smallest sector in their composition.

When evaluating four main commodity indices, the sector weights of precious metals range from 4% to 18%. This means that a 5% portfolio share in commodities translates into only a portfolio exposure of 0.25% to 0.8% to precious metals. This type of contribution of less than 1% to precious metals at the portfolio level will prevent investors from receiving the unique potential portfolio benefits of precious metals. Talk to your financial advisor about how to invest in popular gold or low-risk precious metal ETFs before you start investing in gold and precious metals.

The easiest way to add gold to a portfolio is through an ETF called SPDR Gold Shares, commonly known by its symbol GLD. Another interesting approach to deciding how much gold you should allocate to your investment portfolio is to measure the percentage of global financial assets represented by gold bars.