What Percent of My Investments Should Be Precious Metals?

For anyone who is in the fortunate position to be able to decide how to split up their investments, doing so can be challenging. Between IRA, 401(k), real estate, and any other types of investment opportunities, making a wise decision is little more than gambling. 

The hope is that any investment decision you make will yield large returns, but it’s also beneficial to think outside the box a bit. It’s for this reason that this Redditor posting in r/Gold is wondering how much of an investment portfolio should be made up of precious metals. 

Investing In Precious Metals

Interestingly enough, the Redditor’s original post links to a YouTube video where the creator discusses gold accounting for approximately 40% of German investment allocations. Understandably, this might only be happening in certain countries, especially one that still vividly remembers what hyperinflation did to the country almost 100 years ago. 

To be fair, it’s not an uncommon question to ask yourself, “How much gold and silver should I have?” This is a challenging question for everyone, and it’s also clear that the answer is entirely dependent on your specific needs.

If you want to be diversified in your holdings, that’s arguably the best reason to look at why to invest in precious metals. It’s the magnitude that experts seem to disagree on, but there’s universal agreement that the percentage is likely to be somewhat small. 

How Much To Own

Depending on which expert you consult, there is a fairly strong consensus that you should be no more than 20% invested in precious metals. There is some discussion about going as high as 25% while also considering a range as low as 5%. 

For the Redditor, the video they posted indicates that owning between 5% and 20% is pretty ideal for most people. This would mean that if you invested $100,000, you would own between $5,000 and $20,000 in precious metals.

Of course, the real meat and potatoes of this conversation is what precious metal do you want to own? As this post is in r/Gold, gold is likely top of mind, but there is also an argument for diversifying your precious metal holdings and investing in silver. Over time, silver has consistently shown a higher rate of return, despite gold’s greater popularity. 

Silver (bullion) also costs less than gold, so there is a lower investment barrier to entry if you just want to dip your feet into the precious metal pool. However, it’s also important to know the strength of the economy, as this too could play a role in how much you own. If your nation’s economy appears to be on the weaker side, owning precious metals could be a wise investment as part of protecting your downside investment-wise. 

Set the Right Expectations 

The most important thing to remember about investing in precious metals, no matter how much of a percentage you are considering, is that this is a long-term hold. If you’re looking for quick returns, this isn’t the right investment for your portfolio. As prices fluctuate regularly, it’s important to remember that you aren’t likely to make enough to retire in just a few short months of owning gold. 

If you do have any questions, this is absolutely one of those conversations you should have with a professional financial advisor. There are various views on how to own precious metals, including whether they should replace bonds in your portfolio. This is something you can talk about with a fiduciary financial advisor who can help you understand the pros of owning precious metals as well as the risks.

Just because experts say that you can own as much as 20%, it doesn’t necessarily mean that you should. In fact, you might want to own no more than 10% and let the money that would have been invested go into dividend stocks, where you can create passive income on your path to early retirement.