Image courtesy of Boykung / FreeDigitalPhotos.net
I was recently reminded of Duck Tales, one of my favorite cartoons from when I was a kid. If you’re not familiar with the cartoon, the opening theme song sports a very rich duck in his vault diving into and swimming in a sea of gold coins and jewels. As a kid, cartoons pounded into into my heads the image of a stack of gold bricks being the pinnacle of wealth.
How freaking cool would it be to have a room filled with gold to show off to your friends?
I don’t know anyone that has such a room, or even a safe deposit box filled with gold. But it did make me think about retirement planning, as well as a book I recently read on the subject. One of the underlying messages was to have multiple income streams for retirement such as:
- Stock Dividends
- Interest income on investments
- Passive income such as a rental property or business investment
My mind leaped back to a vault filled with gold. Could gold be a viable investment that would grow in value sufficiently over time to help fund retirement? I started doing some research about the history of the price of gold on the internet. According to the information I found, while the price of gold per ounce has decreased 22% over the last 5 years, it is up over 1800% over the last 36 years.
Not bad.
If diversity is the name of the game, gold is certainly an investment in a different category, and it has it’s advantages. One that comes to mind is that it’s a physical asset that (hopefully) will grow in value just as real estate. While it doesn’t generate any income until you sell it, it does come maintenance free, which is more than you can say about a rental home.
Investing in gold isn’t a new topic. I found great articles at Moneycrashers and FreeFromBroke and even a site called GoldPrice.com that is dedicated to informing people about the ins and outs of investing in gold.
These are just some random thoughts rolling around in my head, and require a lot of additional thought before I’d start constructing that concrete vault in the backyard.
What do you think about investing in gold? Would you do it? Why or why not?
I definitely want to own a decent amount of gold once I start building up assets. I think it’s a good hedge against the dollar and economic volatility in general.
Diversity, diversity, diversity…right DC?
I literally just finished reading an article in Forbes that mentioned how the price of gold has dropped from its high a few years ago and now may be a good time to buy. We just funded our Roth IRAs with our tax return money (yes, we got a huge refund, which is something we’re going to fix for next year), and we were thinking about buying some shares of a gold ETF with it. I think it’s all about balance. We certainly wouldn’t want it to be our entire portfolio, but we’d like to have a small percentage in gold.
You definitely don’t want to put all your eggs (or even most) in one basket. Looking at the link in the post that shows the history of the price of gold, it definitely has dropped over the last few years – which has been a very long and odd drop as far as history is concerned. It may indeed be the time to stock up on gold bars! 🙂 Thanks for you comment, Dee!
I think its an option. Investigating is about diversification. Once you do the research you can determine if gold would be any riskier then the stock market.
It’s a tough choice right now, in my opinion Brian. Gold has dropped quite a bit off it’s high, but the stock market has been doing well too.
You know how much diving into a vault of gold would hurt? haha
I don’t know enough about gold to consider it as an investment. It seems pretty volatile though.
Yeah, I always wondered how the dude from Duck Tales did it…LOL. 🙂 I don’t know much about it either, but it seems like it may be something worth looking into – thanks for stopping by!
Our pension, bonds, and dividend paying stocks make up the majority of our retirement investments. But we do own some gold, mainly because I know it will never be worthless. Even though it doesn’t throw off dividends or interest income, it sits in our safe deposit box and unless the government makes it illegal to own gold like FDR did, when things go to hell we can access that and at least get some groceries or bullets. 😉
LOL, nothing has more buying power than throwing down a gold brick!!!
I believe investing in gold has its place, as a part of an overall diversified portfolio. That said, I spoke to far too many investors who were heavily invested in it, to the expense of discounting other things – which is really an issue if you’re on the extreme in any area of investing. We’re not invested in gold as of now, but wouldn’t count it out as a very small part of our overall portfolio. I’d likely invest in a Gold ETF in one of our IRAs if we did – not that that’s advice per se. 😉
Extremes in anything seldom work out – I guess maybe I’ll have to put a permanent hold on that vault. LOL.
Investing in precious metals would be a good tactic in an overall strategy for retirement, but I wouldn’t make it a primary focus. It’s a way to diversify your wealth, but there are many other things to consider ahead of that. Here are six points I’d like to emphasize on the subject.
– First, previous metals aren’t really an investment as much as they’re a hedge against inflation and protection against devaluation of the dollar. That’s one of the reasons they ought to be part of your portfolio for the long haul. When promises on paper fail (including the promises printed on fiat currency), money generally moves in the direction of real stores of wealth like gold. As an example of the protection offered, a quarter from 1964 will fetch more than three paper dollars today. A few years ago that same quarter was worth more than five paper dollars. The 90% silver content of the quarter isn’t worth any more now than back then, it just takes more of our devalued paper currency to buy it now.
– Second, I would most certainly have other investments under my belt before I would consider precious metals. I would have a home that is paid for, some land to my name, and a small enterprise of my own before I would spend any money on precious metals. Other items to consider before precious metals would include items from the “long view” perspective like your own water well, a means of generating your own energy, a way to provide part of your own food supply, and home improvements that support energy conservation over the long haul.
– Third, gold is a classic store of wealth, but I would look to silver as well, and probably favor silver over gold. Silver generally outperforms gold in terms of dollars per ounce gained or lost, and you can buy much more silver for the dollar than gold. Silver also comes in sizes that allow much easier trading with others and exchanging back into paper currency. Consider that silver is about $20 per one ounce “round” and gold is about $1,300 for that same amount. Having an ounce of gold is like having paper money in your wallet with 1,300 as the denomination on its face…it would be awkward.
– Fourth, if you have precious metals, make sure they’re in the form of physical assets, not investment vehicles. We have entirely too much paper investment now and not enough in tangible forms. It’s one of the reasons (in addition to market manipulation) that the price of precious metals has been driven down…when you can print and sell and trade promises instead of having to deliver on them, the price of what you’re promising is naturally going to be lower. When it comes to trading your wealth for another form, you’ll do much better if you have precious metal in your hand instead of a promise of precious metals on a piece of paper.
– Fifth, now is probably a good time to purchase precious metals if you want them to be part of your portfolio for the long haul. The prices have dropped and stabilized for many month and with the way our economy is stalled and our monetary policy continues to devalue our currency, the future looks bright for precious metals as a way to retain the wealth you have now.
– Sixth, and lastly, consider that Russia and China and India have been big purchasers of gold for many years now, while the gold reserves in the U.S. have been dwindling. India is now shifting to investment in silver because their laws restrict how much gold their citizens can purchase. Also consider that when the Germans recently demanded their gold from the Federal Reserve, they were stonewalled and then stalled for seven years. It’s a clear indication that we don’t have gold reserves like we used to. Recently the U.S. Mint stopped making silver rounds for several weeks, despite high demand for them…another indication that availability of the physical asset was being stretched to its limits. Also consider that countries around the world (like China and Russia) are now making deliberate moves to trade products in their own money instead of the reserve currency of the world, the U.S. Dollar. And, many countries (like China, Russia, Iraq and Libya) are (or were planning to) trade oil in their own currencies instead of the U.S. Dollar (known as the petrodollar). All of these indicators suggest that “good ol’ American currency” and other fiat currencies around the world might soon lose much of their value because there isn’t anything backing them except the full faith and credit (and enormous debt) associated with the governments that authorize their printing.
I’ll wrap up with an anecdote. Just a few days ago a friend of mine helped me take my boat out of the lake and put it in storage until my next fishing trip to Texas. I thanked him and told him I was going to give him a generous tip for all his efforts. I then handed him fiat currency from the country of Zimbabwe, it was a 50 billion dollar note (that’s billion, not million). He looked at me in disbelief, and took a moment to count the zeros behind the 50. He then asked me what he might buy in Zimbabwe with this money, and my reply was, “A pack of chewing gum, perhaps.”
Wow, that’s a lot of great advice, Clair – certainly lots to think about. I’m particularly interested in what you said about silver. I’m certainly not going to invest in fiat currency, that’s for sure. LOL.
Gold is a hot topic these days and it should be. With prices being pretty low now, they can’t keep dropping for much longer. I’m a big fan of diversifying using gold. I wouldn’t necessarily put more than 15% of my portfolio into it, but it’s a great way to protect yourself against the volatility of the dollar. Thanks for the great post!
Thanks for sharing your thoughts, Josh – I agree…what goes down, has to eventually come back up, right???
I wouldn’t say specifically for retirement, but it is a great way to invest in general. Gold is and has been one of the most demanded products ever, and because of that, it is very valuable. I say go for it!
That’s true, David – people love gold jewelry and I don’t see that demand going away anytime soon. Thanks for your thoughts!