Monday, December 06, 2010

Pros/Cons Of IRA & 401K Gold Accounts

Few investments have been more volatile over the decades than Gold. In recent years, the price of an ounce of Gold has soared to astronomical levels and some people have rushed to sell traditional stock investments and flood their IRA and 401K accounts with Gold. So, what are the pros and cons of investing in raw Gold as part of an IRA and 401K account? The pros side consist of following the latest trend (rising Gold prices) and riding that trend to a big payday come retirement time. However, as many folks can already attest to - riding former financial trends in the NASDAQ and the real estate market caused some Americans to put off retirement forever. Some experts recommend only a 15% investment in Gold as part of a balanced retirement account.

The cons of investing in Gold lead with the fact the all precious metals are always volatile in price, which mean Gold prices could drop like a rock at any time. However, there is just as good of a chance that Gold could double in price over the next 12 months - as well. The biggest thing on the cons side to owning raw Gold or Gold based mutual funds is that there is little to no stability in the pricing of the markets. While some gambler type of personalities love the way Gold prices rise and fall on a daily basis, the average investor does not have the temperament to ride out all of that volatility, especially in their retirement accounts. That is why most financial experts recommend only a small percent of retirement dollars be invested in Gold.

While I tend to see more cons than pros when it comes to investing in Gold in a 401K or IRA account, I do believe there is a better than 50/50 chance that Gold will continue to rise in the near future. The reason I think this way is because the US government has not shown any willingness to tackle the runaway deficits that are ruining the country. It will always be easier for politicians to continue to borrow money that they don't have - than to tell the voters back home they can't have something they want. Nothing on Earth increases the price of Gold faster than the current overspending by governments around the world. Outside of an IRA or 401K account, it is probably wise to invest some money in Gold - unless you believe Washington politicians are really serious amount paying down our huge national debt.

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