Dave Ramsey Recommends Investing in Gold
Dave Ramsey recently wrote an article entitled, “Why Investing in Gold Is a Bad Idea.” In it, he asserts that investing in precious metals is similar to flushing money down the toilet.
He may convince novice readers, but experienced precious metals investors and advisors know his arguments are flawed – this article will outline why.
1. It’s a speculative investment
Speculative investments can be risky; while they have the potential to make you rich, they also carry the risk of ruining your entire portfolio. Suze Orman recommends allocating no more than 5% of your money toward commodities like gold.
Gold’s value has steadily been increasing over the last year, yet experts predict that 2023 may prove disappointing due to increasing interest rates which will drive down U.S. Treasuries values and curb gold’s price growth.
Contrary to other financial assets like stocks and bonds, gold does not provide any yield. Furthermore, its storage and insurance costs are costly. Therefore, for investors seeking safety in an investment vehicle with higher returns like stocks that pay dividends or real estate.
2. It’s a risky investment
Gold has long been seen as an investment that will protect against inflation and provide security during times of economic instability, yet its price can fluctuate wildly over short time frames, making it an extremely risky venture that should only be undertaken if you can accept potentially losing some capital in return.
Gold does not pay dividends and there can be additional storage and insurance costs associated with owning physical gold, which makes the asset class more complex than stocks and bonds.
Gold investing can be an excellent way to diversify your portfolio and guard against inflation, but should never become the centerpiece of your investing strategy. As such, it is advisable to consult a financial professional prior to adding this asset class to your portfolio.
3. It’s a volatile investment
Gold’s price fluctuation makes it an unreliable investment option, especially for those seeking steady returns. Although gold can serve as an effective hedge against inflation and currency devaluation, investors should keep in mind that it does not pay out dividends or interest.
Therefore, precious metal prices could consume too much of your attention rather than helping build equity in real estate or building your 401k account. Ramsey’s advice may be valuable; however, other types of investments could provide better returns.
If you’re considering investing in precious metals for the first time, consult with a fiduciary investment advisor who can assist in finding out if it fits with your goals and risk tolerance. A Gold IRA might also offer great long-term returns.
4. It’s a long-term investment
Precious metals do not offer income-generating abilities or yield dividends or interest payments, which makes them unsuitable as short-term investments due to market fluctuations that could cause their value to quickly drop off. They should instead form part of a long-term portfolio such as retirement accounts or real estate holdings.
Investors who invest in gold might think it can protect them against inflation, but such claims are unsubstantiated. Since Congress repealed the gold standard in 1971, precious metals no longer guarantee their value relative to U.S. currency.
Gold should represent no more than 5–10% of a long-term portfolio investment, as there are more reliable investments like stocks and bonds that should be prioritized over gold investments in terms of reaching financial independence or early retirement. Instead, the focus should be on saving and paying down debt in order to build wealth through savings accounts and reduce debt burdens.