Gold investing has long been a smart and effective way for investors to protect their existing funds and set themselves up for future growth. In recent years, investing in the precious metal has surged thanks to its reputation for hedging against inflation and diversifying portfolios that otherwise would have felt adverse effects from the economic climate. These features are attractive to a wide array of investors, including those just starting with the yellow metal. 

That said, like any investment choice, beginners should carefully consider the pros and cons of investing in gold before moving their money. And they should do their best to have the answers to a series of important questions now so that they can improve their chances of gold investing success when they do get started. To that end, below we gathered three important questions beginners should ask before investing in gold.

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3 questions beginners should ask before investing in gold

Whether you’re a savvy investor or just getting started, gold doesn’t operate in the traditional ways some other, better-known assets do. So beginners need to start thinking of the answers to the following questions as they begin their gold investing journey.

Am I looking to make a quick profit?

As with any investment, the lure to turn a quick profit is strong, particularly with an asset like gold which has experienced more than 14% price growth in the first half of 2024. But it would be a mistake for beginners to invest in gold solely to turn a quick profit. 

Instead, gold is considered to be better as a safe-haven asset that protects your portfolio via diversification and the ability to maintain or even grow in value during inflationary periods. While you can, in theory, turn a quick profit if you buy in low and sell quickly (some experts think the price will hit as high as $3,000 per ounce), beginners would be better advised to take a long-term approach to the metal instead.

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How does it fit in with my overall portfolio?

Because of the safe-haven nature of gold, it’s critical to know where it fits in (or doesn’t) with your overall portfolio. This means limiting it to 10% or less of your overall investments so that other, more volatile assets like stocks and bonds can perform as desired. 

At the same time, if you have a portfolio already diversified with other, less reliable investments, the 10% gold threshold may be too high and you may want to consider a gold investment in a smaller amount. Only you will know the exact make-up of your portfolio — and where gold can precisely fit in. Just make sure to know where the opening lies before getting started as you could accidentally offset the benefits of other investments with the wrong amount of money put into gold.

Which type is right for me?

While beginners may think of gold bars and coins as the only way to invest in the precious metal, there are a wide variety of ways to get started. Some, like gold IRAs, are relatively safe and effective for retirement planning. Others, like gold stocks and futures, however, are much riskier and require a more thorough approach. Beginners will need to understand which type is best for their experience level in advance or risk doing significant damage to their wider portfolio.

The bottom line

With inflation still a concern and a growing price, many beginner investors may be considering a turn to gold now. And while the yellow metal has a wide array of benefits, it’s critical to approach gold with a nuanced approach. That includes understanding the answers to questions about the metal’s profit-making ability, its place in a portfolio and the types to invest in (and avoid). By doing their research and building the best answers possible to these questions, beginner investors can significantly improve their chances for gold success, both now and long into the future.