In short - NO. It is a very bad idea. If you are buying actual gold in your IRA - and are beginning your required minimum distributions - the transaction costs will eat up your return very quickly.
If, on the other hand, you are thinking of buying gold derivatives - such as a gold exchange traded fund, or a mutual fund - then the volatility inherent in commodities is generally considered too high for a withdrawal portfolio.
I would consult with a Certified Financial Planning Professional. Whoever gave you this advice was either 1) untrained, or 2) a product saleman.
Jon Castle http://www.wealthguards.com
Everybody has an opinion. But what makes sense for others may not make sense for you. Sure, gold like any other commodity may have a role in your overall portfolio. But the best allocation between stocks, bonds, CDs and commodities will really depend on a number of factors. You should speak with a certified planning professional to help. At the very least, get a real handle on your risk tolerance (at www.MyRiskTolerance.com), resource needs, income resources and overall comfort with the market to determine the asset allocation that makes sense for you and your situation.
Why gold? Are you worried about inflation? Are you looking for income? Gold is at the top end of its price range and most individual investors are notoriously late for the party. For inflation there are other ways to hedge: inflation-linked US Treasuries, inflation-linked corporate notes, mutual funds and ETFs with Master Limited Partnerships or other commodities.
Do yourself a favor and speak with a professional - preferably one who is not into selling you something that will produce the most yield for him and his company.
Frances, this is not a good idea for at least two reasons. The first reason is diversification and the second reason is the historical rate of return of gold.
Diversification is the best reason to own different asset classes. Asset classes are different ways of breaking the different areas an investor can invest into like gold, short term government bonds, stocks, and cash. It’s important for your diversification to be in alignment with your investment goals and your tolerance for risk. If your diversification is not in alignment, you will not get your desired investment results.
The second reason is the historical rate of return for gold. Let’s remember “all history is prologue” as said by Shakespeare. In the last year, gold has underperformed the U.S. Stock market as measured by the S&P 500©. In the medium term, last 8 years gold has outperformed the S&P 500©. In the very long term, since 1800, gold has significantly underperformed U.S. stocks. Go to http://finance.wharton.upenn.edu/~rlwctr/papers/9110.PDF if you would like to read the basis for my statement.
Short and sweet, don’t put all your eggs in one basket. You don’t drive your automobile by looking out of the rear view mirror; don’t manage your investments by looking backward. Work with a professional investment manager who you may fire at any time. Have their compensation based on how your investments perform; it puts them in the frying pan with you.
Good luck frances, Dave
As a side note, DALBAR reports that "diversifed" asset allocation investors have only returned 1.11% average annual return over the last 10 years (April 2012), so there are flaws to that as well.
10 years is a small sample out of 210 years of actual data. The last 10 years of equity performance are an extreme left tail occurrence. If we have regression to the mean return for global equities the average annual return will be higher than the last 10 years. If a sample of annual returns were chosen randomly over the last 210 years it is likely that the annual return would be greater for global equities than the annual return for gold over the sample years. It's very unlikely the global economy will have another great recession with severe deflation such as we have had in the last 10 years.
I'd say, unless financial reform takes a different direction, and unless legislators deal with deficits, you may be surprised by how often "left tail" returns occur.
Dear Frances - I would encourage you to consult with a professional, credentialed, fee-only advisor who can give you objective advice. I think you would find that the cost is more than justified by the benefit you would receive. There are many excellent resources, including this site, to help you find someone to help you. I encourage you to interview at least three prospective advisors, and compare what they have to say, before making any decisions.
The CFP Board of Standards, one of the main professional organizations dedicated to promoting industry ethics, integrity, and sound financial advice, produced a list of 10 questions to ask before choosing a financial advisor. I modified and expanded upon them a few years ago for a magazine article: https://www.northcapital.com/images/production/other/10_questions_printed_06_12.pdf
Good luck to you in your search.
Best, Jim
Gold is not an investment, it's pure speculation. Would you prefer to invest your IRA or speculate with it?
Gold isn't an investment? That's interesting. Maybe it's not your favorite, no?
I should have started with " In my view". I define an investment as something that has earnings, growth, dividends (Equities) Growing income ( Real estate) Fixed Income ( Bonds) - Because pure hard Gold has not of that, I view it as speculation - sort of like baseball cards or collectibles.
