How much gold does a beginner actually need? An expert weighs in

If you’re considering investing in gold, it can be hard to know where to start.

How much gold should you buy? Where do you buy it? Where does a gold IRA come in? And what should you expect?

Below, a financial planner walks us through creating a portfolio that builds wealth over the long term thanks to a smart diversification strategy that includes gold.

Use gold to diversify your portfolio

When you’re just beginning to build an investment portfolio, one of the most important things to keep in mind is diversification: making sure your portfolio holds a large number of different assets that perform differently under various market conditions.

That includes the usual stocks and bonds, but also assets like gold.

“It’s important to have at least some assets or investments in a portfolio that have the chance of going up, or at least maintaining their value over that time,” says Steven Rogé, CFP, chief investment officer, and CEO of R.W. Rogé & Company.

He tells the story of graduating from college during a technology bubble and watching his peers invest in hot tech stocks only to get burned when the market crashed around them.

“It took a long time for them to come to the realization that it wasn’t necessarily the stock market that did them wrong,” Rogé says. “It was that they didn’t have a diversified portfolio throughout that journey.”

Gold can be useful as a diversification tool because it doesn’t correlate one-to-one with the stock market. There are times when the market in general is performing poorly, but gold is still performing well. “Sometimes they move in sync,” he says of stocks and gold, “but a lot of times they don’t.”

How much gold beginners should buy

Rogé says that the majority of a beginner’s portfolio should be in stocks. After that, gold can make up “a healthy chunk” of what’s left, from the low-single digits up to about 20% of your long-term assets — which should be about 12% of your entire portfolio.

Most portfolios are made up of assets designed for long-term, mid-term, and short-term life goals. For example, you might have some of your portfolio designated for retirement — generally a long-term goal for beginners — and some of your portfolio designated for goals with shorter risk horizons, such as buying a house.

Rogé says that, while the makeup of your portfolio will depend on your individual needs, most people end up with around 60% of their portfolio tied to long-term assets like gold. The other 40% holds short- or mid-term assets.

Assuming your portfolio has that 60/40 split, that means he recommends having up to 12% of your portfolio as a whole dedicated to gold.

His recommendation is similar to that of successful investor Ray Dalio. Precious metals company Goldco says Dalio recommends putting 5-10% (sometimes up to 15%) of your portfolio in gold.

In general, however, you won’t want to invest in anything to get rich quick. A responsible investor plans for the long term, using a steady wealth-building strategy tailored to their specific goals, timeline, and risk tolerance.

“Ultimately, gold should be invested in for the long term, not for a short-term speculative play,” Rogé says.

Gold IRAs plan for the long term

One way to buy gold for long-term wealth-building is in a gold IRA, which allows people to use physical gold in a retirement plan. Gold stored in a gold IRA can receive the same tax advantages that other retirement plans offer.

Because buying gold is different from buying stocks, you can’t open a gold IRA at your brokerage. Instead, a precious metals company such as Goldco can walk you through the process.

Any reputable dealer will explain how the process works and lay out the fee structure up front. Expect to pay standard fees for expenses like storage; the IRS doesn’t allow you to keep the gold from your gold IRA at home, so a trusted third-party depository will hold it for you. You should also expect fees to buy the gold in the first place, and you can even look ahead to what sort of costs to expect when you ultimately sell the gold in the future.

Whether you’re a beginner or an expert investor, you can build a long-term portfolio including gold.