The Pros & Cons of Including Some Gold in Your IRA
When it comes to your IRA, diversity is the key. Some people interpret that to mean they should invest in a variety of stocks and bonds, while others prefer to invest in a diverse set of assets—such as real estate, stocks, and metals. If you fall into the latter group, you might be wondering if gold is a good addition to your IRA portfolio. As with all investment questions, the answer is highly dependent on your situation. However, there are some benefits and drawbacks of investing in gold that stand true in most situations, so if you keep those factors in mind, you're likely to make a smart decision. Below are just a few pros and cons to consider.
Benefits of Investing in Gold
When your investments are geared towards retirement some years down the road, there are three key benefits to including some gold in your portfolio.
History: People have considered gold to be valuable for almost as long as there has been recorded history. Sure, the value of gold goes up and down, but it is unlikely that you will wake up one day and have your gold be worth nothing. This is not always the case with other investments, like real estate. There are definitely houses that suddenly become value-less due to environmental disasters and the like! If the value of your gold goes down, you can count on it eventually going back up again—as long as you're able to wait long enough (which is one reason why you need a diverse portfolio).
Value During Hard Times: Because gold has been around for so long, people tend to hoard it and turn to it when times are tough. So if the rest of the market and the economy take a turn for the worst as you near retirement age, your gold will probably go up in value as the demand will increase. This gives you some assurance that you will at least have some money to turn to in retirement.
Liquidity: It's pretty easy to liquefy gold into cash as needed. You can sell a little or a lot. This cannot be said of some other investments like real estate. Selling a house, for example, is a big endeavor—and you can't just sell half of it in most cases. You can also sell gold almost anywhere, from local buyers to online investors.
Drawbacks of Investing in Gold
While these drawbacks may not keep you from buying gold, they are something to consider and to arm yourself against as you do invest.
Low Growth: The yield with gold investments, even in the best of times, does not tend to be as good as with stocks or real estate. This is a good reason not to invest all of your money in gold. Its value won't climb high enough for you to have made a substantial return by the time you're ready to pull it out.
Cheating and Dishonesty: Since you can buy gold from almost anyone and the industry is largely unregulated, there is a potential for fraud. People do sell fake gold or gold that is not worth as much as they claim. For this reason, you need to be very cautious when investing in gold. Only buy from a reputable vendor, and have any large gold pieces looked over by a second professional before you invest.
To learn more about the benefits and drawbacks of including gold in your IRA, talk to local investment services such as McAlvany ICA. They could guide you to create the best portfolio of investments for your unique needs, depending on your income and when you plan to retire.