Allocation / Portfolio Share
Also: Asset allocation, Wealth distribution, Portfolio weighting
Allocation refers to the deliberate distribution of a portfolio across different asset classes – including precious metals – in order to bring risk and return into a desired balance.
Allocation (from the Latin allocare – to assign) describes how an investor distributes their capital across different asset classes such as equities, bonds, real estate or precious metals. The portfolio share indicates what percentage of total wealth is attributable to a particular class. A well-considered allocation is the heart of any long-term investment strategy.
Why Precious Metals in the Allocation?
Precious metals – above all gold and silver – fulfil specific functions in a portfolio that other asset classes can only partially provide:
- Inflation protection: gold preserves purchasing power over the long term, as it cannot be reproduced without limit.
- Safe haven: in times of crisis and recession gold tends to cushion losses in equities.
- Low correlation: precious metals correlate little with conventional securities and thus reduce overall portfolio risk.
- Currency protection: as a global reserve asset, gold offers protection against currency devaluation.
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 guideline values from common model portfolios, not investment advice.
The precious metal share recommended by the World Gold Council for standard portfolios is often between 5 % and 15 %, depending on risk appetite, 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 %.
With the savings plan calculator you can calculate how regular purchases – such as monthly gold buys via cost averaging – build up the portfolio share step by step.
Strategic vs. Tactical Allocation
Strategic allocation sets the long-term target weighting and is only rarely adjusted – e.g. 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 and Greed Index as well as historical price trends are useful reference points.
Rebalancing
Over time, portfolio shares shift due to differing price movements. Rebalancing restores the target weighting – for example by buying undervalued positions or partially selling overvalued ones. This process enforces disciplined "buy when cheap, sell when expensive" and can improve long-term returns.
Tax aspects of rebalancing should be assessed individually. 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 in direct possession or allocated gold in a vault – full ownership rights, no counterparty risk.
- Unallocated / paper gold: ETFs, ETCs or certificates (paper gold) – more liquid, but subject to 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 to inflation, currency risks and market disruptions – the optimal weighting always depends on personal goals and risk appetite.