Gold In Your Portfolio

If you have a 10% allocation to gold right now, sit tight. If not, James Rickards says, this is a great time to top up your allocation. That's the one good thing about lower prices. It's a great entry point for those not yet fully allocated

-  James Rickards

Gold is down almost 20% from its March high and is having one of its worst years since 2013. Maybe this is a turning point, maybe not. On the flip side, it is not time to panic. Prices could really take off from here. We'll see.

But today, I'd like to turn away from price swings and look at another important aspect of gold investing quantity. Specifically, I'll discuss the right quantity of gold allocation for your portfolio expressed as a percentage of investable assets.

As an investor, that's very important.

Is Your Portfolio Truly Diversified?

The term "investable asset" is narrowly defined. It does not include your home equity or business equity.

You should not take market risk with the roof over your head or the way you earn your livelihood. Whatever liquid net worth you have after excluding your home and business comprises your investable assets.

From there, portfolio allocation is a matter of achieving diversification that leaves your portfolio robust to all states of the world. "Diversification" is another term that is not well understood.

I run into investors all the time who have 90% of their investable assets in equities (especially passive index funds or sector ETFs) and claim to be diversified. They'll point out that index funds and ETFs can be composed of 50-500 stocks in 10 or more major sectors such as technology, mining, retail, consumer durables, etc. They're highly diversified! I tell them they're not diversified. They may have 50 or 500 stocks in 10 sectors, but they are in one asset class equities.