Monthly Archives: January 2013

Should Pension Money be Invested in Gold?

Many people ask this question. The answer really depends upon a couple of factors.

Age to retirement is the first of these. For a person with a long time horizon, gold is an excellent way to diversify a pension portfolio. Gold offers a long term opportunity for significant capital growth. Someone who had added gold to their pension twenty years ago would have reaped a return on their investment that is almost impossible to get anywhere else without exposing the portfolio to extreme risk. In the short term, however, gold’s volatility might prove detrimental. Someone who invested in gold in 2012 with the expectation that it would continue the upward price movement it enjoyed during the first decade of the 21st century could have experienced a decline in the value of that portion of the pension portfolio.

The next factor to consider is an individual’s personal tolerance for risk. Again, the volatility of gold prices is behind this consideration. There is nothing whatsoever wrong with taking an extremely conservative approach where one’s retirement funding is concerned. Gold has shown consistent appreciation in value over the long term, but someone who monitors their pension fund on a monthly or quarterly basis might not be able to comfortably tolerate the ups and downs of the gold market.

It is possible to overcome these price swings somewhat and still include gold in a pension portfolio by investing in gold in such a way that it represents only a small portion of the total portfolio. This way, even someone who is risk adverse and has only a short time horizon before reaching retirement age can benefit if gold prices rise without being severely penalized if they fall or remain stagnant.