By Beth Pinsker
If things go poorly for the world, this reader wants to grab the gold and keep going
Got a question about investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write to me at [email protected]. Please put “Fix My Portfolio” in the subject line.
Dear Fix My Portfolio,
I’m 62 and already retired. For funds, I have a divorce settlement that’s invested with a financial adviser. I’m scared about the way the world is going, but I don’t want to just stuff cash under my mattress. But what about gold? I see headlines about it hitting all-time highs, and $3,000 an ounce sounds like a lot.
It seems like if the financial system imploded, gold would be a good thing to have stashed in Switzerland or someplace. Should I be investing in gold somehow, maybe instead of bonds? Whenever I bring this up with my adviser, he just waves me off, but I think that’s probably because he wouldn’t make as big a fee then?
Gold Bug Wannabe
Dear Gold Bug,
There’s a lot of talk about gold, for sure, and, technically, investing in it is not that hard. You can do this just by going down to your local jewelry store and buying a necklace. You wait for the price of gold to go up and then head to one of those “we buy gold” shops and sell it at a profit.
The wrinkle? For one, it’s not very efficient. It’s also not very easy to value in your portfolio, prices are volatile, there would be a lot of fees involved on both ends of the transaction and it could cause you tax headaches.
Most of these same downsides apply when you step it up to invest in gold as an asset class, which is probably the reason why your adviser steers you away from getting involved. If you don’t understand what you’re getting into, it could be costly for you. Even buying gold in an exchange-traded fund format is more complicated than buying an index fund, because different capital-gains taxes and reporting requirements apply.
“It’s probably in the middle to upper range of the spectrum of participant complexity,” said Ben Loughery, a certified financial planner based in Atlanta. “That’s why a lot of people kind of shy away from gold and, honestly, that’s kind of why I don’t really go into gold.”
If you’re willing to dig in, though, there can be some upsides, which is why gold has persevered for millennia as an investment, despite being declared dead numerous times. People are always looking for an ironclad emergency fund as a hedge against the end of times, and for some people that might mean gold, rather than cryptocurrency.
The upside of gold
If you look at a price chart of gold over the last 10 years, it looks roughly like the choppy upward march of the stock market during the same time – in 2015, gold was around $1,200 an ounce and now it’s dancing around $3,000. As my colleague Brett Arends has pointed out, gold can beat stock-market returns.
But it also cannot. “Gold can take some big swings either way,” Loughery said, although he added that historically it returns about 8% on average.
Some people may decide to play the long game with gold for a small portion of a portfolio, but then there’s the question of exactly how much. Certified financial planner Matt McKay has been helping clients invest in gold since the early 2000s, maintaining a position of roughly 5% of their portfolios. They’ve upped their allocations recently to take advantage of economic conditions.
“Currently we have just under 10% in client portfolios – which is a lot when you consider what most people have or advisers recommend,” he said.
Sean Beznicki, director of investments at VLP Advisors in Virginia, said his firm’s clients maintain some exposure to gold as a global risk hedge, but they do this through diversified international funds.
“The costs of physical storage, ownership, and its lack of income generation make direct investment less attractive.” he said. “Instead, we prefer exposure at the fund level, alongside other uncorrelated securities, to optimize diversification and risk management.”
Gold is tricky as a hedge though. You have to consider more than just the value of negative correlations – meaning, when stocks go down, gold would presumably go up.
“Gold tends to perform well when interest rates decline, but this isn’t always necessarily the case,” Loughery said. “An investor should size their positions appropriately with gold, because while it has defensive qualities, gold prices can move either way quickly, depending on which way U.S. currency is going – or any other geopolitical event.”
The downsides of gold
If you’re thinking about gold as a worst-case scenario, a bank vault filled with physical gold might not be your best option, especially one in a foreign country. If civilization collapsed, how would you get to it? And how would you carry it?
There are options, though, and many closer to home. If you want to hold physical gold in some way in an IRA, the IRS requires that you have a special account, known as a Gold IRA. These may come with high fees and be hard to correlate with the rest of your portfolio.
If your gold investments are in funds in a taxable environment, there could also be extra charges involved. Most of the ways you hold gold will generate a K-1 statement, which are issued by trusts, partnerships and commodity investments. This is not an insurmountable complication, but more than the average taxpayer usually deals with. So you may incur extra fees on the fund side and for tax preparation because of them.
“I try to avoid K-1s as much as possible,” said Ryan Zabrowski, a certified financial planner and author of the new book, “Time Ahead: Investor’s Guide to Prosperity and Impact.” “There’s plenty of wonderful investments out there that don’t have the K-1 headache.”
If you invest in a gold ETF that does not report via a K-1, you still have to contend with higher tax rates because of the way the IRS treats physical gold as a collectible. As such, an investment in a gold ETF like the SPDR Gold Trust (GLD) is taxed at the maximum capital-gains rate of 28% if held for more than a year.
And if you just want to keep gold coins under your mattress? Could be even more of a hassle. “When you’re actually talking about the actual physical gold, that’s a whole different ballgame,” Loughery said. You’d have to get it appraised and insured, plus track any changes in value yourself and manage any transactions.
Of course, if there is a collapse of civilization, you wouldn’t have to worry about tax rates so much, so maybe that’s the only true silver lining I can offer that will help with your anxiety.
You can also join the Retirement conversation in our Facebook community: Retire Better with MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
More Fix My Portfolio
My Roth IRA stock is down. Is there any way to harvest the loss?
Thinking of making a statement by not paying your income taxes? This is what that could cost you.
I’m 70, single and have to choose between retirement or keeping my home: ‘I’m in need of an angel’
-Beth Pinsker
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
02-20-25 0619ET
Copyright (c) 2025 Dow Jones & Company, Inc.
