4 of the biggest mistakes experts see people make investing in gold

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• Gold is at an all-time high as investors use it as an inflation hedge and diversification tool.
• Gold often underperforms compared to high-yielding assets like stocks and bonds. 
• Experts warn against over-investing, timing the market, overlooking fees, and skipping your research. 

Gold has been on a bull run throughout 2024, reaching a record high in October. Investor sentiment is favoring the gold market at the moment as the purchasing power of the US dollar continues to decline. 

"The primary reason to invest in gold would be to keep up with inflation, " Drew Martino, wealth manager at Savvy Advisors, told Business Insider. "Gold doesn't pay dividends or interest like stocks and bonds; you simply rely on price appreciation."

Gold has long been used as a hedge against inflation and a means of further diversifying portfolios for greater stability and decreased risk. Here are four of the biggest mistakes experts warn against when you're investing in gold. 

1. Over-investing

While gold generally appreciates over time, it underperforms compared to other higher-yielding market-linked investments like stocks and bonds. Allocating too large a percentage of your portfolio to gold limits your ability to capitalize on other market opportunities. 

"I think it's still a great time for the average investor to consider buying gold if they already have
an established portfolio of stocks and bonds," Martino said. "I wouldn't recommend investing in just gold if you
don't own any other assets."

For instance, the S&P 500 index had a 26.3% annual return in 2023. Gold's annual return was 13.1%. Gold is higher-earning than traditional savings accounts and beats cash, but it shouldn't be the main growth-oriented investment in someone's portfolio.

 Your portfolio's exact percentage of gold depends on your goals, time horizon, and risk tolerance. "In our view, an allocation ranging from 5% to 10% would be most prudent," Stephen Jury, Global Commodity Strategist for J.P. Morgan, told BI.

2. Trying to time the market

Whether you're investing in gold or in anything else, don't try to time the market. Although some advanced day traders can make a substantial profit on short-turn around based on market sentiment and speculation, most people lose more money than they walk away with. Investing in gold is no different.  

"The optimal investment approach, consistent across all asset classes, is a buy-and-hold strategy with a long-term perspective," Jury said. "This strategy aligns with the principles applied to stocks and bonds. Time in the market always beats timing the market." 

While the gold market is currently on a bull run, its duration is not guaranteed. There may never be a "perfect" time to buy or sell gold, so having a long-term perspective is better for building sustainable wealth. 

"It is liquid, a global store of value, and can be stored physically if needed. These characteristics make it very popular as a reserve asset," Jury said. "We anticipate that gold will continue to rise in the years ahead." 

3. Overlooking the high fees

The costs of storing and securing physical gold can erode potential returns. High fees can further diminish the overall benefit of investing in gold. Look for gold companies that offer affordable prices and low costs. Many of the best gold IRAs offer competitively priced assets and rates. 

You could also consider gold-backed investments like gold ETFs and mutual funds, which tend to be simpler than physical gold and more cost-effective. "They generally charge a fee, but the expense ratio is usually very low," Jury said. However, gold funds have their own risks and fees to consider, like high administration costsand trading fees. 

Regardless of how you prefer to invest in gold, carefully review and understand how the fees may impact your long-term portfolio growth. 

4. Not doing your homework

"I would say that those people who are afraid of missing out — and they're seeing these record highs — that they should seriously consider putting some quality time aside doing their own research across multiple credible sources of information," said Colin Bosher, COO and cofounder of Nuway Capital.

While gold is often considered a "safe-haven asset" due to its historical stability, it's important to remember that no investment is entirely risk-free. By understanding the history of gold as an investment and the best strategies for investing in gold, you are more likely to generate long-term wealth and portfolio stability.

You should also know where your gold comes from and that the company you purchase precious metals from is reliable and trustworthy. After all, you're investing for the long term.