Going For The Gold

Gold stocks can provide valuable diversification. It's true that gold stocks might have modest long-term returns, perhaps one or two percentage points over inflation. But they can deliver an additional benefit because gold stocks perform much differently from other investments.

You might set aside 3% of your portfolio for these stocks. When that allocation dips, buy more stocks, but sell when they move well above 5% of your portfolio. This buy-low, sell-high strategy can add significantly to your investment returns.

Gold stocks (usually, mining companies) are much more volatile than the underlying gold price, so this rebalancing strategy will work better with stocks than with gold bullion.

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