Depending on whom you ask, jumping on the gold bandwagon is the worst or best move an investor can make. But most people agree that holding a small amount of the yellow metal is good for a portfolio. Gold can be useful because it usually moves up when markets move down. People trade the commodity on sentiment—if they think the global economy is headed for disaster, they load up on gold. However, if the economy improves the metal’s price can fall dramatically. (Just look at the crazy volatility in September.)
Experts say that soon-to-be retirees, or conservative investors, should put no more than 5% of their portfolio in gold. Only buy it as a hedge. A small enough amount provides some upside protection against a troubled market, but won’t kill you if the price drops. But beware: It’s easy to get excited about the commodity when the price rises. Don’t be tempted to put more money into it than you should.
(Research, editorial and spiritual support provided by Bryan Borzykowski; “artistic” support by Trevor Melanson )