Gen Z Is Investing in Gold More Than Stocks — Is That Actually a Good Idea?
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Nicole Spector
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Cory Dudak
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Finance experts across the board recommend diversifying your portfolio. A diversified portfolio includes an assortment of different investments that, in combination, effectively reduce your overall exposure to risk. In addition to holding stocks and bonds, a diversified portfolio might also include gold, an alternative investment that can help hedge against inflation and market ups and downs.
In our time of economic uncertainty and high inflation, Americans are evidently hearing the message to invest in gold loud and clear. According to recent research published by Retirement Living, Americans rank gold as the most trusted alternative asset during times of inflation. The survey found that 63% of Americans are skeptical of making new traditional investments with the current state of the economy, with Gen Zers being the least skeptical; 3 in 10 were even more interested in alternative investments.
Millennials are also interested in investing in alternative assets; within the past six months, as almost half (43%) reported doing so. One millennial survey participant indicated that traditional stocks are being regarded with caution. “The uncertainty of the stock market makes it likely that I won’t make any money with traditional investing, and possible that I will even lose money,” she said. “It’s important to diversify, and now is a good time to look into alternatives.”
It’s not a bad thing that younger generations are embracing alternative investments such as gold; but what may be worrisome is the idea that they’re opting for only alternative investments and foregoing stocks. Ideally, you should be diversifying your portfolio across a variety of asset classes, rather than putting all your eggs in the alternative basket, so to speak
Additionally, gold isn’t 100% risk-proof.
“Gold futures are also popular among precious metal investors, but they are considered speculative and not a long-term strategy,” said Ohan Kayikchyan, CFP, founder of Ohan The Money Doctor. “The Retirement Living article mentions some disadvantages of investing in precious metals such as lack of generated income, theft potential and liquidity risk, but doesn’t mention the cost of maintaining these investment types. Prior to investing in physical gold, silver, or precious metal-related investment products, such as precious metal bars or ETFs, take into consideration their storage and insurance costs. These costs can potentially reduce investment returns in the long run.”
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Additionally, stocks right now are providing stronger ROI than gold.
“In the first six months of 2023, the S&P 500 total return is more than 16%, while gold performance is not near that number,” Kayikchyan said.
Note that investing in gold isn’t a no-no — not by any means. But it’s very important to invest in every recommended asset — particularly traditional assets such as stocks and bonds.
