Maintaining a well rounded portfolio is ideal for each type of investment you own, whether the investment’s purpose be for short term or long term goals. If you have an IRA, it is especially important to evaluate your allocation of assets. Your investment manager, which may be yourself, needs to consistently determine if your allocation is meeting your long term needs by its current performance and its projected performance.
A good example of allocation, depending on your age and goals is to own a combination of stocks, real estate, fixed income investments, cash such a money markets and CD’s and precious metals such as gold. Of the listed options, gold has very little volatility and has increased in value over 150% in the last twelve years. Gold is not influenced by the ups and downs of the marketplace like other investments. It also does not increase in value at a fast pace. It takes the patient investor to allow gold the time it needs to increase in value.
If you choose to add gold to your IRA portfolio, you should be aware of its unique properties, so you can make an informed decision about how much to own.
- Gold is one of two very precious metals: Gold and Titanium
- Gold is not affected by market conditions
- Gold is a long term investment only
- Gold’s value will never drop below zero
- Gold’s value tends to rise with domestic and world turmoil: inflation, rising rates, etc.
Depending on your investment horizon, you, the investor will profit more or less from the ownership of gold. If you’re very young, in your 20’s, for example, gold is an absolutely great investment for you. If you’re in your late 40’s, gold is still a good investment, especially if you’re expecting high growth over time. The older investor, someone in their 50’s and 60’s should realize buying gold is more about maintaining the value of your IRA rather than about growth of your IRA.
How much gold should you own in your IRA investments? This is definitely based on the amount of time the investment is held. Young investors can afford to hold gold for many decades reaping a sizable return on their investment. Even with this potential gain, they wouldn’t want to lose out on the growth most investors gain in the traditional market when they have a long horizon. A good mix might be to have 35% invested in gold,40% in stock, 15% in real estate, and 10% cash. Older investors with at least 10-15 years before retirement might consider 25-30% in gold, 50% in fixed investments, 10-15% in stocks and 10-15% in cash. Those in retirement should consider holding onto 15-20% gold, 50% fixed investments and 20-30% cash. Learn more in this post.
Your age, investment risk tolerance and long term goals all determine the suitability of gold as an allocation within your IRA. Depending on your need to sell your assets, having gold can be an excellent investment. In the accumulation phase of building your IRA, you have far less need to sell your gold, but in retirement, this may become a necessity, so reduce your gold holdings as you age.