Gold has long been known as an alternative currency. It usually survives economic turmoil and is a relatively easy commodity to invest in. It is known as an asset that essentially has no systematic risk and maintains its purchasing power. Several different market studies have concluded that the beta of gold is insignificant, as is its r-squared. While that’s good news, the return that gold offers can be unpredictable. Gold returns are not always parallel to those of equity markets, thus making it difficult to use technical analysis to predict the returns. Nevertheless, over the past 10 years, gold returned an average of 15% annually, while equity market returns struggled to climb over the 0% mark.

Gold always has been and probably always will be a good hedge against inflation. Some investors pull money out of their brokerage accounts and rush to buy gold amid recession. This is not always a good idea. Not only can it produce unfavorable tax consequences, it can stall the growth of your portfolio.

In any case, gold alone is vulnerable too. It is through diversification that any investor can achieve some balance between security, predictability and returns. The motto of most financial advisors reads, “Don’t put all your eggs in one basket” and over the years it has proven itself. Diversification does not mean that we blindly pick 50 investments for our portfolio and distribute our assets according to our intuition or best guess. There is a science to portfolio building and it starts with determining your risk tolerance. Based on the results of a simple questionnaire, your general risk tolerance and the risk tolerance specific to your given account will produce the investment mix that would both meet your return expectations and keep your portfolio at a risk level that you can comfortably accept.

There are various channels through which you can buy and sell gold. One of the easiest ways to buy gold is by investing in a mutual fund that invests in gold or gold stocks. One of the popular ways to sell physical gold is by working with a company that will pay cash for gold. Be sure you research the company and confirm its trustworthiness before bringing in or mailing your gold.