Gold has been capturing headlines as the price moved steadily higher since late summer. If the metal's price volatility unnerves your more conservative clients, consider the following strategies:
Spread It Out
Greg Richardson, MS, CFP and wealth advisor with Halpern Financial in Rockville, Md., recommends up to a 6% portfolio allocation in gold for conservative clients. He diversifies the allocation across exchange-traded funds (ETFs), mutual funds, and broad-basket commodity funds.
He uses SPDRs Gold Trust (GLD) for a direct-investment exposure to the metal that retains liquidity and avoids the hassles of storing physical purchases.
His mutual fund investments focus on gold mining stocks and include funds such as American Century Global Gold Investments (BGEIX) and Fidelity Select Gold (FSAGX).
The final category, broad-basket commodity funds, typically includes agriculture and energy investments. "The downside is you don't get a true gold play here (with the broad funds) but you are getting a more diversified approach to investing in gold," Richardson says.
Hit the Stops
That's the approach taken by John McAvoy, CFP with Waterstone Retirement Services in Canton, Mass. He works with both direct-investment ETFs like GLD and iShares Silver Trust (SLV) and ETFs that invest in mining stocks such as Market Vectors Gold Miners (GDX) and Market Vectors Junior Gold Miners (GDXJ).
