Allocation / Portfolio Share
Also: Asset Allocation, Wealth Distribution, Portfolio Weighting
Allocation describes the deliberate distribution of a portfolio across different asset classes – including precious metals – in order to balance risk and return according to the desired objectives.
Allocation (from the Latin allocare – to assign) describes how an investor distributes capital across different asset classes such as equities, bonds, real estate, or precious metals. The portfolio share indicates what percentage of total assets is allocated to a particular class. A well-considered allocation is at the heart of every long-term investment strategy.
Why Include Precious Metals in the Allocation?
Precious metals – above all gold and silver – fulfil specific functions within a portfolio that other asset classes can only partially replicate:
- Inflation protection: Gold preserves purchasing power over the long term, as its supply cannot be expanded at will.
- Safe haven: During crises and recessions, gold tends to cushion losses in equity markets.
- Low correlation: Precious metals correlate little with conventional securities, thereby reducing overall portfolio risk.
- Currency protection: As a global reserve asset, gold offers protection against currency depreciation.
Typical Allocation Models
| Investor Type | Equities | Bonds | Precious Metals | Other |
|---|---|---|---|---|
| Conservative | 20 % | 50 % | 15 % | 15 % |
| Balanced | 50 % | 25 % | 10 % | 15 % |
| Growth-oriented | 70 % | 10 % | 5–10 % | 10–15 % |
| Crisis-oriented | 30 % | 20 % | 25 % | 25 % |
Note: These figures are reference values from common model portfolios and do not constitute investment advice.
The precious metal share recommended by the World Gold Council for standard portfolios typically lies between 5 % and 15 %, depending on risk tolerance, investment horizon, and the macroeconomic environment.
Calculating the Portfolio Share
Portfolio share (%) = (Market value of precious metals / Total portfolio value) × 100
Example: Total portfolio €50,000, of which €6,000 in gold and silver → precious metal share = 12 %.
The Savings Plan Calculator can be used to calculate how regular purchases – for example, monthly gold purchases using cost averaging – gradually build up the portfolio share.
Strategic vs. Tactical Allocation
Strategic allocation fixes the long-term target weighting and is adjusted only rarely – for example, 10 % gold permanently in the portfolio. Tactical allocation deviates from this in the short term when market conditions justify it: if the Gold-Silver Ratio rises sharply, investors might temporarily overweight silver.
For tactical management, metrics such as the Gold-Silver Ratio, the Fear & Greed Index, and historical price trends serve as useful benchmarks.
Rebalancing
Over time, portfolio shares shift due to differing price developments. Rebalancing restores the target weighting – for example by purchasing undervalued positions or partially selling overvalued ones. This process enforces a disciplined "buy low, sell high" approach and can improve long-term returns.
Tax aspects of rebalancing – such as the one-year speculative holding period under § 23 para. 1 no. 2 EStG for physical precious metals – should be reviewed individually. This is not tax or investment advice.
Physical vs. Paper: Allocated and Unallocated Gold
When allocating to precious metals, the form of the investment is also decisive:
- Physical (allocated): Bars and coins held directly or allocated gold in a vault – full ownership rights, no counterparty risk.
- Unallocated / Paper gold: ETFs, ETCs, or certificates (paper gold) – more liquid, but carrying issuer risk.
- Mixed form: Many investors combine physical holdings (core anchor) with liquid ETF positions (tactical management).
In Brief
A carefully chosen precious metal allocation strengthens a portfolio's resilience against inflation, currency risks, and market disruptions – the optimal weighting always depends on personal objectives and risk appetite.