Many investors have heard that investing in commodities like precious metals is a wise decision, and some may be wondering if it is wise to invest in gold as an investment for retirement. In many instances, this is a commodity that has a place in a well-diversified portfolio. It offers investors many benefits, and with a closer look at what it has to offer, you may decide that now is the right time for you to add this commodity to your retirement portfolio.
A Hedge Against Inflation
Inflation is unfortunately a common problem that investors must deal with, and those who are nearing retirement may be particularly sensitive to its effects. It can erode away the value of investments and may be instrumental in preventing you from reaching your goals. Inflation rates may range from one to four percent or more, and this can directly impact the value of your portfolio. This commodity has historically proven to provide a hedge against inflation. If you are looking for a way to reduce the impact of inflation on your portfolio's net value, this is a solid investment to consider.
Protection from Devaluation in an Economic Crisis
Economic crises unfortunately may be difficult to predict, and some may come on strong with very little advance notice. This gives you minimal time to make adjustments to your retirement portfolio. The value of this commodity, however, has proven to hold up well to economic crises. In fact, many investor turn to gold in times of economic crises, and this means that gold is a sound investment to consider for all types of investment environments.
Part of a Well-Balanced Portfolio
As beneficial as gold is in a retirement portfolio, it does have some downsides in comparison to other investment vehicles. For example, it will not generate dividends, interest or other forms of recurring income for you. Furthermore, the value increases at a slow rate in comparison to other vehicles available. The low yield or return associated with this commodity is often ideal for those who need a low-risk portfolio. However, for others, it is a great counterweight to a portfolio that has riskier investment options. Most investors want to include this as part of a well-balanced portfolio rather than to invest solely in gold.
Many investors are comfortable purchasing stocks, bonds and mutual funds as part of their retirement portfolio, but it can be a break from the norm to invest in a commodity such as gold. While this may be a commodity or investment that you are less familiar with, it does have a significant number of benefits. These benefits make it an investment vehicle that you may want to include in a properly balanced portfolio with a solid mix of high risk and low risk investments for your retirement years.
By Andre Bradley