Gold’s historic run in 2025 had cast a gilded glow over the precious metals market, but a recent slump has exposed the reality of investing in commodities if you’re looking for big, shiny gains: gold is not a growth investment.
In January, gold reached a record $5,416 per ounce, but quickly plummeted back to $4,641 per ounce in February (1). This correction reveals a few things: one, gold is an asset investors flock to when markets are volatile. As such, a rosy outlook from Wall Street for 2026 has more investors turning back to stocks to grow their wealth (2).
Two, investors typically use gold to safeguard existing wealth, and it’s not an asset that typically appreciates quickly. And third, what goes up must come down. Gold prices were inflated by recent trading activity, and a correction — which analysts believe is one of the most significant of our times (3) — was almost inevitable.
Here’s what you need to know about how to use gold in your portfolio, and how savvy investors make use of the metal as a safeguard, not a growth strategy.
Gold and silver have historically lagged behind stock market returns. In fact, beginning in the 1980s, the stock market saw explosive growth, while gold remained steady (4).
Gold is a safe haven asset for a reason: its value isn’t tied to the performance of any one company, or a single country’s economy, and it typically holds value without major slumps. However, gold doesn’t compound like stock market returns, meaning you can’t earn money on your money when it’s parked in a commodity asset.
“Gold glitters but earnings compound,” Pat Beaird, co-founder of Beaird Harris Wealth Management in Dallas, shared with CNBC (5). “Over 30 years, compounding wins every time.”
Panic-buying gold, as many investors did in 2025, could have been a short-sighted move, especially if dips are going to lead to panic selling. As Warren Buffett famously said of the stock market, “when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint (6).”
This advice holds true for gold as well: Stick to small amounts in your portfolio, hold it for as long as possible before selling, and look to other, tried-and-true growth investments to compound your wealth.
“Because gold is a diversifier, when the bad times come along it does uniquely well, and when the good times are prosperous, less so, [but] it’s an effective diversifier,” said Ray Dalio, as CNBC reports (7).
The traditional advice to hold up to 5% of a portfolio in gold still stands. As with any alternative asset, getting the right mix in your portfolio and not over-indexing is essential. A good rule of thumb is to discuss any changes to your portfolio with an investment advisor first, as they can let you know when any of your allocations are too risky.
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If you’re looking to diversify your portfolio with an investment in non-traditional assets, a few rules typically apply (8):
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Make decisions in peacetime: Set your allocation limit for the investment when the market is calm, and be prepared to stick to it.
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Hold ‘forever’: A stock’s performance is measured in decades, not in days. Stick to your investments, especially those in your retirement account, for the long term.
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Don’t panic sell: Selling at a loss can have a serious impact on your retirement portfolio, seeing that you lose decades of compound interest.
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Buy slowly: Use dollar-cost averaging to enter positions — like investing in gold — gradually rather than buying lump sum positions.
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Don’t over-monitor: Watching the market daily can lead to anxiety. Aim to readjust your portfolio once a year, ideally with the advice of a professional.
Investors for whom gold hasn’t lost its shine should also know there are a number of ways to invest in this alternative asset, and gold bars don’t have to be among them.
For example, gold ETFs, mutual funds and gold mine shares all follow the metal’s performance, but are slightly removed from the volatility of the price as they track the whole industry.
Buying physical gold has its risks as the asset must be stored safely, and it’s also not easy to sell quickly. Buying bars and coins from a dealer also typically comes with a markup, and not all dealers are equally honest. So, if you want to buy physical gold, it pays to do your homework.
In addition to gold, there are a number of different alternative assets that can make up a small portion of your portfolio.
Cryptocurrency, REITs, or investments in emerging markets all can have their place in a well-diversified portfolio, but should also be held for the long term. With these alternative investments, the key is good research and moving slowly.
Look at past performance and seek out the advice of experts. You want to avoid the hype as much as possible, especially for investments like crypto, and ensure that you can make a safer bet with some level of protections in place.
Remember that a well-diversified portfolio isn’t a gamble — it’s a carefully considered investment in your future.
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Trading Economics (1); Bloomberg (2); Morningstar (3); MacroTrends (4); CNBC (5, 7); Berkshire Hathaway (6); Empower (8).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
