Invest in a Gold Backed 401(k)

  • Gold-backed 401(k)s are retirement accounts that invest in physical gold.
  • Similar to precious metals IRAs, gold-backed 401(k)s feature investments in physical gold, which is held in custody by third-party entities.
  • Gold-backed 401(k)s are relatively new investment vehicles.
  • Investors should carefully consider the fees, risks, and restrictions on these types of retirement accounts before making a decision.

Gold-backed 401(k)s are a relatively new type of retirement account. These accounts, which are also known as gold retirement accounts, feature investments in physical gold, which is held in custody by third-party entities. Precious metals-backed retirement accounts can be a good option for anyone looking to diversify their retirement portfolio.
Gold-backed 401(k)s are similar to precious metals IRAs, but differ in several ways. Read on to learn more about gold-backed 401(k)s and how they work.

Gold's Advantages

Gold's popularity among investors has soared in recent years, and gold-backed 401(k) accounts have surpassed $100 billion in assets.
From an investor's standpoint, gold has several key advantages over other assets, including:
Relatively easy liquidity:
Gold is a relatively liquid asset, meaning that it can be easily bought and sold. After the Great Recession, market prices for many assets plummeted, and gold was no exception. But gold's price remained relatively stable because it is relatively easy for an owner to sell.

Low correlation to other assets:
An asset's correlation to the performance of other assets is a measure of how the two assets move in relation to each other.

For example, if an asset's price is highly correlated to the price of another asset, then any moves in the latter will likely cause the former to move in the same direction.

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High-inflation hedge:
Gold's price tends to rise with inflation. The value of a dollar drops whenever inflation rises. This means that when inflation goes up, investors can purchase more for their money with an ounce of gold.

Gold's price tends to move independently of the dollar. In other words, gold's price generally goes up or down independently of the value of a dollar, even if the dollar falls or rises in value.

Gold is traded on exchanges all over the world, and its price can be tracked daily.

No third party is required to hold gold in reserve for investors who purchase gold.

Store of value:
Gold is valued by investors for its stable value over time.

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Risks of Gold

Gold has been seen as a hedge against inflation, but high inflation tends to reduce the value of gold.

Inflation can cause gold to lose value, especially if inflation is rapid, as it can erode the purchasing power of gold.

Gold does not pay a dividend, while stocks pay dividends to shareholders.

Gold and precious metals tend to be more volatile than other commodities.

Gold's Downside

Gold is widely considered a safe-haven asset, which means that investors often turn to gold during times of uncertainty or turmoil.
However, gold also has its downsides, such as:
Gold isn't a liquid asset, which means it can be hard to buy and sell.

Gold doesn't pay an income.

Gold doesn't offer voting rights or dividends.