Courtesy of Mish.
Periodically I receive questions on gold ownership. How much should one own, and where?
Let’s start with the first question:
How Much Gold Should Someone Own?
There is no fixed answer, but rather a general methodology that I like:
- Do not invest outside your comfort zone.
- Think in terms of percentages, not fixed amounts.
- For some, 10% is too much, for others 30% is too little.
- Some do not trust anything else and are willing to hold a huge percentage of their assets in gold
- If a 30% decline in value would give you sleepless nights, then whatever percentage you have is too much.
- If you dislike investments that do not yield a dividend, then gold probably should not be a significant portion of your portfolio.
- Even if you dislike investments that do not pay a dividend, it may be wise to consider putting 5% of your assets in gold to protect against a crisis.
For those who understand the reasons to own gold and will not panic over fluctuations, in my assessment, 20% is a reasonable starting point.
Finally, for those with a lot of credit card debt or other high interest debt, I suggest paying off all that debt before making any investments.
As to the second question:
How To Own It?
There are numerous choices.
- Gold Miners
- Physical Gold
- Gold ETFs
- Gold Funds
Gold miners are a leveraged play, and in the case of junior miners, a speculative play on gold. The bulk of one’s gold assets should not be in this class.
…
