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The economy of recent years has left many Americans looking for new ways to protect and grow their savings. Seniors, in particular, many of whom rely on a tight budget made up of retirement savings and Social Security, need to be particularly careful with where they store their money and where they invest it. While traditional savings vehicles like high-yield savings and certificates of deposit (CD) accounts have proven beneficial in today’s inflationary climate, there are also some investments that many have recently turned to for help.
Gold is one of those investments. Investing in the precious metal hit an 11-year high last September as many sought a hedge against inflation. But gold doesn’t operate like some other investments do and seniors should go into the process clear-eyed and knowledgeable.
To that end, below we’ll break down four important things seniors should know about gold investing.
Ready to get started? Learn how an investment in gold could help you here.
4 important things seniors should know about gold investing
Here are four important things seniors considering investing in gold should understand.
It can help with inflation
A driving force behind gold’s renewed popularity in recent years has been the hedge it can provide against inflation. Unlike other assets that suffer in inflationary periods, gold tends to hold steady and may even rise in price.
Gold is hovering near record highs right now and is projected to increase significantly over the next decade. Compared to the volatility of the stock market, in which big gains and big losses are common, and the inconsistency of real estate, gold is often a smart choice, especially now.
Learn more about how gold can help with inflation here.
It can diversify your portfolio
Gold is a great way to diversify your portfolio to offset the inevitable swings in performance that other assets inherently come with. When those assets underperform, your larger portfolio will be buffered by the consistency of gold, ensuring that your portfolio doesn’t suffer a total loss.
While stocks, bonds and other investments are still worthwhile, diversification is key to long-term financial success and gold can provide that right now.
It’s not a traditional income-producing investment
While gold has major benefits for investors today, one advantage it doesn’t come with is an instant income-producing ability. While you can make money with gold over time, the gains will be tedious and come incrementally.
This isn’t to say that you shouldn’t invest in gold (many seniors can and should), but it’s important to know what an investment in the yellow metal can and cannot result in. Instead, invest with an eye toward inflation buffering and portfolio diversification as mentioned above.
Investing should be limited
As noted, portfolio diversification is vital to financial success and stability. And that means knowing how much to invest in any particular asset to not leave yourself exposed. Most experts recommend limiting an investment in gold to 10% or less of your portfolio but the range between 1% and 10% will primarily be dictated by your investor profile. Seniors with a long-term investing approach may want to be on the higher end of that spectrum while others may want to be on the lower side. Either way, gold should generally be capped at 10% of your portfolio to make room for other asset classes.
Get started with the right gold investment for your goals today.
The bottom line
Seniors looking for some help with their portfolio should strongly consider turning to gold. Gold’s ability to help with inflation and diversification are major advantages right now. That said, seniors need to be smart about their expectations for what gold can produce short-term and they should keep their investing in the precious metal limited so to avoid hindering the growth potential of other assets. By understanding these four important factors about gold investing now seniors can better improve their chances of having the metal improve their financial health now and into the future.
Matt Richardson is the managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.
