Gold investing mistakes beginners should avoid

It never hurts to explore your investing options, particularly now when inflation is still looming in the background. During times like these, it becomes more important than ever to have a diversified portfolio with investments that can both produce income and others that can protect what you already have saved. For many investors, gold can successfully help with the latter.

Long considered a hedge against inflation and a smart way to diversify your portfolio, gold investing has taken on new appeal in 2023 and prices came close to a record high earlier this year. Like all investments, however, there are better ways to approach the precious metal than others. For beginners, especially, gold investing can be successful but some common mistakes will need to be avoided to gain the greatest return.

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Gold investing mistakes beginners should avoid

Here are three gold investing mistakes beginners should do their best to circumvent.

Investing too much

Gold has a natural shine and appeals to investors of all types and ages, leading many to over-invest in the precious metal. But that could be a pricey mistake. Most experts recommend limiting your gold investment to 5% to 10% of your overall portfolio. That’s because gold acts more as a protector of your existing investments and less as a way to make income or cash quickly.

Accordingly, beginners should carefully measure the amount they invest in gold against their larger goals and overall investments. Too much into gold could prevent the natural growth that may have occurred by putting your money into stocks or bonds. This is particularly true for younger investors who will be better-served long-term by being aggressive now. That said, the specific amount you invest in gold varies by age so be sure to do your research in advance.

Not sure how much you should invest in gold? Learn more with a free information kit.

Investing in the wrong type

You may think there’s only one primary way to invest in gold but there are actually multiple ways to get started, each with its own pros and cons. Beginners can start with a gold IRA or they can turn to gold bars and coins. They can invest in gold futures or begin with a gold exchange-traded fund (ETF). Each of these gold investments can be advantageous although some are riskier than others while some may be better suited for more seasoned investors. Beginners should first evaluate all of their investing options and then proceed with the type that’s right for them. If they pursue the wrong alternative their investment dollars could quickly dry up but if they pick the right type they may start seeing the benefits of gold reflected immediately.

Not consulting professionals

Gold isn’t as well known as some other investment types. While that isn’t necessarily a disadvantage it does mean that beginners may be better served by taking a more measured approach than they would with, say, stocks and bonds. This approach should account for the help of a professional, whether it be a financial advisor, gold expert or certified financial planner. Each can approach gold investing with their own unique perspective and experience, helping beginners develop a better understanding of their gold investing options – and maximize any potential benefits.

Learn more via a free investors kit here.

The bottom line

Gold can be a smart and effective way to protect your money and diversify your portfolio. Beginners, however, need to be strategic in their approach. Specifically, they should avoid investing too much in the metal (keeping their portfolio amount limited to a maximum of 10%). They should also understand all of the different types in order to pick the one best suited for their needs. Finally, beginners shouldn’t be afraid to consult a financial advisor or gold pro in order to ensure that their investing approach is sound and secure.