Ask Ric: Question about Holding Gold in an IRA

Consider Buying Gold Mining Stocks or a Gold ETF Instead

Ric Edelman: Let's head off to Visalia, California. Ken is with us on the phone. Hey, Ken, how are you? 

Ken from Visalia, CA: I'm doing well, Ric. Thank you very much for asking. I hope you're also doing fine.

Ric: Indeed I am. Thank you for calling. How can I help you?

Ken: Well, I was curious. Been involved in 401(k)s for quite a number of years. Early mid-80s, shall we say. And here lately, the talk of precious metal, IRAs has been of interest to me. So I dipped my fingers into that. You know, perhaps with the economic climate and the political climate, I'm just kind of curious. Is it safe, secure or should I maybe think about taking it on the chin and pulling my stuff out, taking the penalties? So, you know, you're a pretty smart guy, Ric. So I'm interested in what you have to say about this.

Ric: Well, tell me, Ken, what's your motivation in doing this? Why pull the money out of the IRA and pay all those taxes? What's the benefit of doing so?

Ken: Well. If I've got that gold in hand in a safety deposit box, of course, because of the size - but maybe, perhaps if we have an economic collapse, I would have some to trade. I know that's very extremism. But frankly, now that I think it through, while we're talking, I would dare say that if you advise, 'Yeah, Ken. Can go ahead. Do that," you're really thinking things are going to turn around bad.

Gold Can Be Part of a Diversified Portfolio (…and so Can Crypto) 

Ric: Yeah. So. Okay, so let's frame all this. You give me a good perspective on it all. So let me tell you what I think. First of all, gold certainly does belong in a diversified portfolio, just like any other asset class, you know. So no problem to own in gold. There are several ways to go about owning it. You can buy the bullion directly, you can buy gold coins that are issued by the US government, the Canadian government. Other governments issue gold coins. They're 99.9% pure gold and they are worth pretty much whatever the value of a price of gold is at the given moment. That's very different from collectibles or rare coins. Now you get into numismatics and a whole different breed. And when you see these, you know, late night TV infomercials that are touting gold as a safe haven and so on, you want to stay away from that nonsense. It's a hassle to own gold directly because it's a physical asset. You've got to, once you get it, you have to figure out where to store it, right? Because like any other valuable asset, you don't want it to get stolen, you don't want it to get lost. And this is why a lot of people buy a gold mutual fund or a gold ETF and they buy gold for you. They also invest in gold mining stocks, companies that are mining for gold. The value of the mining stock is often relative to the price of gold. 

This way, you have a liquid security that you can buy and sell whenever you wish. And it's as simple and easy as any other ETF you would own in your portfolio where you can have daily liquidity. And it's pretty simple and easy to own and you don't have to worry about the safekeeping. The downside, of course, is that you just have a security. And if there is an economic collapse and the government shuts down the stock market, well, you're not going to be able to get your money out of that either. So there's no perfect place to do this.

Consider Gold Mining Stocks or a Gold ETF

My personal preference would be to buy gold mining stocks or a gold ETF. I think that's the simplest, cheapest, most convenient way to go about doing it, even though it's not a direct holding of gold, keep in mind that you shouldn't be buying it simply because of the current economic scenario. We are in a period of high inflation, high interest rates, and people say that that's when gold prices rise. That hasn't been universally true in the past six months, so that theory isn't always valid. I wouldn't own gold for that reason. I would own gold simply because you should own every asset class. You should own gold, sure, but you should also own oil and you should also own commodities. You should also own crypto. You should own all this stuff as part of a diversified portfolio.

Ken: Very good. Thank you, Ric. I appreciate that you took some time to talk to me and hear my question.

Ric: Well, it's my pleasure. And I really appreciate your calling, Ken. That was Ken from Visalia, California. You can do what he did. Do you want to ask me a question? Just send your question to AskRic@TheTruthAYF.com.