Very likely your 401k or IRA has lost value over the last 4 years. The investing landscape significantly shifted in 2008, to state the obvious. Many stocks that were viewed as blue chip investments lost significant value overnight such as banking and insurance stocks, and some companies that were considered to be value investments no longer exist, such as Merrill Lynch and Bear Stearns. If you happened to be in the wrong place at the wrong time, your 401K or IRA took a beating and is most likely still down from its previous value.
It is tempting to take the money you have left and hide it under the mattress. The problem with that strategy is that it will guarantee that you will never recover the lost value and in an inflationary scenario guarantees that you will lose even more purchasing value.
It doesn’t mean you need to put it your money back in the stock market, although over time the stock market has proven to be a way for people to make a lot of money. Thorough due diligence is vital and so is diversification.
Real estate is at a bottom, but the bigger question is, how long will it take before real estate starts to recover value? This means you could sit on a real estate investment for some time before you see appreciation and you may not have a healthy market of buyers, so selling your real estate investment could present a challenge. Purchasing real estate for rental is an option but many people don’t want the headaches and hiring a rental services company can get expensive.
One option is an investment in precious metals, such as gold. With gold, the law of supply and demand is a big factor in the future growth of gold prices. Two nations have been big drivers for gold prices because of their robust demand for gold, notably India and China. Both governments have made attempts to stem the purchase of gold in their country, because when gold is purchased with Rupees and Yens it in effect exports that countries currency into gold. India recently imposed higher fees for gold purchases and at the end of 2011 China closed all gold exchanges with the exception of one. The people in both India and China are avid gold investors so these attempts to stem gold purchases have offered only temporary relief from the export of their currency into gold. A recent news report stated that China is expected to surpass India to become the biggest gold purchasers in the world.
Purchasing gold in your 401K or IRA is an option to recover some of your portfolio value and with the continued worldwide demand for gold the value is expected to continue its upward path.
To purchase gold in your IRA, your first step is to find a custodian that is able to meet your needs. If you take personal possession of gold with funds from your 401K or IRA, you will need to take a distribution. Having a custodian hold your gold investment allows you to purchase gold within your IRA or 401K without a distribution. You will need to fill out forms and transfer money from your 401K or IRA to the custodian before you can purchase your gold. Considering a purchase of gold in your 401K or IRA can provide a way to recover some of your lost 401K or IRA value and also provides an insurance policy against a future financial crisis.