What asset class would millennials and Gen Z investors want to own? One answer might be surprising: gold.

According to a recent study by Bank of America Private Bank, which serves ultra-high net worth clients, 45% of wealthy investors under the age of 43 own gold as a physical asset, and another 45% are interested in holding it. These percentages are much higher than other age groups.

This demographic isn’t interested in assets like gold, cash or U.S. Treasuries because they consider them “boring,” said Liz Young Thomas, head of investment strategy at digital financial services company SoFi.

Thomas noted, “With Treasury yields rising, cash is paying higher rates and gold is rising. We’re seeing returns that you don’t normally see in such a short period of time. It’s understandable that when assets are returning well, younger audiences will start to get excited.”

This corroborates another study by money manager State Street, which found that millennials have the highest allocation to gold in their portfolios at 17%, far exceeding the 10% of baby boomers and Generation X.

Why are young investors becoming so interested in this thousands-year-old, somewhat stodgy asset?

First, gold’s renewed popularity is partly due to its healthy spot price, which is over $2,400 per ounce at press time.

Gold bars are also increasingly showing up on shelves in popular retail sectors, raising their profile: Costco, a large chain that began selling one-ounce bars last fall, is seeing $200 million in transactions a month, Wells Fargo estimates.

As young investors' interest in gold is piqued, what rules should they keep in mind? Here are some thoughts from the experts.

Owning physical gold can be tricky

Part of the appeal of gold is that it is tangible. If the global financial system were to go haywire, or currencies collapse, at least people would have something tangible to hold onto.

“I’m finding that my millennial clients are more interested in directly held, self-custodial gold investments as their wealth increases,” said Eric Amzalag, a financial planner in Canoga Park, California. He added that this is because their investment goals are shifting from growth to capital preservation.

Investors will face some unique challenges in holding physical gold, such as: finding a reputable dealer who won't take advantage of others; safely delivering and storing the gold; insuring the gold purchase; and ultimately finding a way to sell the gold, as Costco, for example, won't buy back gold bars from buyers.

Consider Gold ETFs

Gold exchange-traded funds (ETFs), which are either backed by physical gold or invest in gold futures, solve the problems of buying, storing and selling, and also make asset allocation relatively easy.

“There are some fees associated with buying gold ETFs, but if investors don’t want to take physical delivery of gold or silver and are looking for a way to store it, then ETFs are a good option,” said SoFi’s Thomas.

The largest gold ETF, SPDR Gold Shares (GLD), has an expense ratio of 0.4% and has returned more than 23% in one year. Another similar approach is to buy an ETF composed of mining stocks, such as VanEck Gold Miners (GDX), which includes industry giants such as Newmont Corp. and Barrick Gold.

Don’t overweight gold

Gold certainly has a role to play in a portfolio as a non-correlated asset and potential hedge against inflation or volatility, but as a commodity, gold is also highly volatile, with investor preference waxing and waning.

As a result, experts say stocks should still make up a large portion of most investors' portfolios. Shares of companies that generate sales, earn profits, pay dividends and offer potential share price appreciation are a more dynamic asset class with higher long-term returns.

As for gold, younger investors may be looking at it as a complementary side dish, said Jonathan Cameron, a financial planner in Miami.

“We work with a lot of young professionals and we have been adding gold ETFs (around 5%) to many of our clients’ portfolios as a hedge for a few years now. It’s a decision that everyone agrees on,” Cameron said.

The article is forwarded from: Jinshi Data