Overpaying for gold is hardly the only mistake you can make when investing, especially in retirement. Wong Yu Liang/Getty Images Gold has been on an unusual course over the last several months, making it tough for investors to gauge what moves, if any, to make in this landscape. Case in point? Gold prices have trended downward for much of this year, marking a stark turnaround from the conditions that occurred late last year, when the price of gold hit record highs several times.That means if you bought gold just a year ago, you might have paid quite a bit more for your gold bars, coins or other gold assets than you would for those same purchases today. But overpaying for gold is hardly the only mistake one can make when buying gold — especially if you're of retirement age. So what big mistakes should you avoid if you're retired and plan to invest in gold now?Find out how to protect your portfolio with gold and silver today.4 gold investing mistakes retirees are making in today's marketHere's what experts say are the biggest mistakes retirees are making when purchasing gold in today's environment.Using gold for the wrong reasons With all the run-up gold has seen in recent years, some retirees are simply buying gold for the wrong reasons, experts say. While it's certainly possible to see returns on gold — sometimes, even on a short timeline — that's not a reason someone in retirement should be buying gold. It could be a perk if you're forced to sell in a pinch, of course, but it shouldn't be the main driver for investing in gold in the first place — nor is it something investors should expect on a regular basis."One of the biggest mistakes is treating gold as a retirement strategy," says Nick Hamilton, head of retirement and wealth management at Alliant Credit Union. "Unlike cash, bonds, or dividend-paying investments, gold doesn't provide ongoing income, which can be especially important in retirement." Gold can, however, be used as a diversifier to protect against risk in other classes — particularly the stock market. It can also serve as a hedge against inflation, which recently ticked up to its highest point in three years."Gold has historically behaved differently than stocks and bonds over long periods, which means it can help reduce overall portfolio volatility in some market environments," says Joseph C. Klein, a financial advisor and chartered retirement planning counselor with Edward Jones. "It has also sometimes served as a hedge during periods of market stress or unexpectedly high inflation."Learn more about your gold investing options online now.Buying too much goldWhen gold prices dip as they have recently, it can be tempting to buy up more and more — especially when inflation is high. But that can be a major mistake, experts say. "A common mistake I see retirees sometimes make is wanting to over-allocate to gold," says Corey Bates, a financial and investment advisor at Solomon Financial. "Gold is often labeled a 'safe haven' asset, but it's important to keep in mind that it still comes with risk. It can be extremely volatile, and this year is a great example."Generally, experts recommend having no more than 10% of your portfolio invested in gold. More than this, and you expose your wealth to a lot of volatility — which can be very risky once you're in the retirement stage of life. "While gold can provide a hedge to an inflationary environment, over-allocating can create concentration risk in the event gold sees a severe downturn," says Chace Cooper, a financial advisor and director of business development at Double E Financial Solutions. Cooper says it's also important to reevaluate your gold holdings regularly, especially with recent price changes. "If you were owning gold before its recent appreciation over the past three years, it may be good to reevaluate your allocation and rebalance back to your target percentage," Cooper says.Failing to do the researchGold has been pretty popular in recent years as inflation has climbed and economic and geopolitical uncertainty has grown. That demand has led to more offerings on the market — and not all of those are created equal."Investors should also be cautious about high-pressure sales tactics, rare coin pitches, and claims that gold is a guaranteed way to protect wealth," Hamilton says. "If an investment sounds too good to be true, that's usually a sign to slow down and ask more questions." Experts also say to do your research before buying any gold. Look up the retailer, check reviews, and inquire about any fees, storage or other requirements that might come with the investment — and have an extra price tag. "Compare dealer pricing carefully and understand premiums, commissions, storage fees and buyback policies before purchasing," Klein says. "Many first-time buyers dont realize that some gold coins and collectibles carry high premiums over the value of the underlying metal. Those premiums can make it harder to earn a positive return."Forgetting to watch the FedThe Federal Reserve helps manage inflation, so watching what it does can give you an idea of where gold prices might head next. Experts say it's particularly important with Kevin Warsh, the new chairman, at the helm. "If he executes on the Federal Reserve's goals, we will see continued growth in the economy while mitigating inflation risks," Cooper says. "While this will be incredibly difficult, a soft landing would cause gold to lose its value as it is a hedge to economic uncertainty."You can also work with a financial advisor, who can help you determine if gold is a good fit for your goals and, if so, how much to allocate and in what ways. Every investor is different, and what works for some retirees might not be the best fit for another. "Gold often attracts investors during periods of inflation concerns, market uncertainty, and geopolitical tensions, so it's understandable why interest remains high," Hamilton says. "But favorable conditions don't automatically mean it's the right move for every retiree."The bottom lineGold's recent volatility hasn't changed its role in a retirement portfolio. It's still a diversifier, not a paycheck. Retirees who treat it as a growth engine, load up beyond what their overall allocation can absorb, skip the homework on dealer fees and premiums or ignore what the Fed does next are the ones most likely to get burned. The fix for all four mistakes is largely the same: Keep gold to a modest slice of your holdings, buy from a reputable source with transparent pricing and revisit that allocation periodically rather than reacting to headlines. If you're unsure how gold fits with your other assets and income needs, a financial advisor can help you settle on a number — and stick to it, regardless of where prices go next. Edited by Angelica Leicht Source: Original Article
