Why Gold Is Called a Safe Haven Asset
Gold is a physical asset that has served as a store of value for thousands of years. Unlike stocks or bonds, there is no risk of its value dropping to zero due to corporate bankruptcy or sovereign default. Gold holds universal value worldwide, and its real value is preserved regardless of which country's currency collapses.
Gold's most notable characteristic is its tendency to rise in price when stock markets crash. During the 2008 Lehman Brothers crisis, stocks fell approximately 50% while gold rose about 5%. In the early stages of the 2020 COVID crash, gold prices also rose alongside the sharp decline in equities. This inverse correlation is what makes gold useful for reducing portfolio risk.
Gold's Long-Term Returns Compared to Stocks
Gold's long-term returns are lower than stocks. Over the past 50 years, gold's average annual return has been approximately 7-8% (in yen terms), while the S&P 500 has returned approximately 10-11% (in dollar terms). However, gold's returns are heavily influenced by exchange rates, and during periods of yen depreciation, yen-denominated returns are boosted. During the sharp yen depreciation from 2020 to 2024, gold's yen-denominated price more than doubled.
Gold does not generate dividends or interest, so holding it alone produces no income. Stocks provide dividends and bonds provide interest as regular cash flows, but gold offers none. Gold's value depends purely on price appreciation (capital gains). This is why gold should not be the core of your portfolio.
How to Invest in Gold
Individual investors have several ways to invest in gold. Gold ETFs (such as SPDR Gold Shares) can be bought and sold through a brokerage account just like stocks, making them the most convenient option. Gold accumulation plans allow you to purchase gold for a fixed amount each month, providing the benefit of dollar-cost averaging. Physical gold bars and coins offer the reassurance of holding a tangible asset, but come with significant storage costs and wider bid-ask spreads.
For cost efficiency, gold ETFs are recommended; for starting with small amounts, gold accumulation plans are ideal. Purchasing gold ETFs in a NISA account also provides the benefit of tax-free capital gains. Introductory books on gold investing will help you understand gold's price drivers and its role in a portfolio.
Appropriate Gold Allocation in a Portfolio
Since gold does not generate interest or dividends on its own, allocating a large portion of your portfolio to gold is not rational. Generally, allocating 5-10% of total assets to gold is considered appropriate. Even this modest allocation provides a sufficient cushion effect during stock market crashes.
For example, if you hold 10% (100 man-yen) in gold within a 1,000 man-yen portfolio, and stocks fall 30% while gold rises 10%, the overall portfolio decline is mitigated to approximately 26%. Allocate the remaining 90-95% to stocks and bonds to pursue long-term asset growth. Practical books on portfolio diversification provide concrete allocation examples that include gold.
Next Steps - Add Gold to Your Portfolio
If your current portfolio is 100% stocks, consider reallocating 5-10% of your assets to a gold ETF. Purchasing gold ETFs in a NISA account makes capital gains tax-free. By rebalancing once a year to maintain your gold allocation, you can continuously benefit from the cushion effect during market downturns.
Try our simulator to compare a portfolio that includes gold (assumed return of 4-6%) with a stocks-only portfolio (assumed return of 5-7%). While returns may be slightly lower, the risk-adjusted return may actually improve.