Gold accounts for 5.6%, and silver 2.2% of my portfolio. I am really not as well-versed in this area as I am with dividend paying stocks and ETFs, so will just offer some very general thoughts.
I use ETFs (GLD/SLV) to invest in them because it’s annoying and expensive to physically hold it. Of course, you could just buy them from a store in your town or whatever, but I’m no expert and would actually have no idea if I was getting ripped off at not. And how do you really sell it? Then, safety deposit boxes costs money and keeping it at home isn’t an ideal option due to the stress of break-ins, etc.
I know that there are plenty of financial gurus out there who don’t love “investing” in precious metal because it’s purely a speculation play. Companies should be increasing earnings, which adds value to their stock price because the P/E ratio will eventually reach an equilibrium over time and they can also use their earning to increase shareholder value through dividends or stock buybacks. Precious metals do none of those things. The only way that they increase in value is through increased demand, either through more people wanting it, or less production for some reason.
So why buy them? Simply because it’s a hedge: that is when there is fear in the market and stock prices are going down, people are buying precious metals because they think it’s “safe” and that forces the prices up. It’s a way to protect against wild market swings because dividend paying stocks and precious metals generally act in opposition to each other with regard to stock price.
For my complete list of holdings: check out: Dividend Stock Investing Portfolio.
And of course, people out there who know plenty more than I do!
