Friday, July 08, 2011

Stick gold in your IRA

One of the things that few people seem to realise is that it's possible to have a gold IRA. There are some limitations and specific rules that have to be followed but is possible to have part of your savings as IRA gold.

It's also possible to have a gold 401k, this meaning that you can have as part of your 401k gold.

The real question of course is whether something like this, or a gold IRA transfer, is a good idea or not?

Leave aside the vagaries of the gold market, that we're at an all time nominal high (although not yet in real terms) and think about the basis of any decent savings plan: diversification.

There is no such thing as an absolutely secure investment: there is also no such thing as an absolutely, no doubt about it, profitable one nor is there one that is entirely inflation proof. All investments are a mixture of the three.

And the point of diversification is to make sure that we have a series of different investments, each of which has a different mixture of the three characteristics. We do want to have some "high growth" stocks despite the risks attatched to them. We do want to have some Treasury bonds, despite the low returns, for they are also low risk. But the risk to bonds is inflation: so we also want to have some gold, for while gold might not earn us investment income it has historically been a very good hedge against inflation.

Having all your retirement funds in gold probably isn't a good idea, just like having all your savings in the latest internet darling that's going to replace Google real soon now isn't a good idea.

But a judicious mix of different investments, diversification, is a good idea.

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