Gold ETFs
Freddie: Thinking about ways to keep your retirement money safe and working for you? Today we're going to dig into gold ETFs and other smart investment moves that could give your portfolio a little extra.
Hello again everyone and welcome to Leibel on Fire! I'm Freddie Bell and I'm with the Man. He is Leibel Sternbach. He's an author as well as a person who can help you with your finances, especially if you're a retiree. He's written a couple books. One is called Living With Financial Anxiety, and the other is entitled Authenticity Leibel Sternbach.
We're gonna talk about gold, but hello again and welcome. Hey,
Leibel: how are we doing today?
Freddie: Unbelievable. And I'm just curious, there are a lot of people that you help who are retirees or they're getting close to it. Should retirees consider adding gold ETFs to their portfolio? And how do they compare to owning physical gold?
Tell us the difference.
Leibel: That is a great question. Let's talk about the difference between physical gold and gold ETFs and having gold in your IRA. And then we can talk about the question of whether you should own it or not. So gold, right? If you physically own gold and you have it sitting in a lockbox under your bed or in a safe or whatever the value of that is that you have a hard currency that independent of what the value of the dollar does, independent of what any currency does.
You have something that will always be valued by people and if the economy collapses, if the, power grid goes out, you can buy your next your ticket on the last plane out right, or the last boat out you have something to barter with that people will value. And gold is valued, not just because it's valued as a currency, but it has value as a metal, right?
Nowadays we use it in electronics. So it is very valuable and is increasing in value and it's only gonna increase more in value because it becomes rarer and rarer and we need it in electronics. So you have a value in that regard. It's an easy metal to work with, so historically it was very valued
Leibel: because it was very easy to make to make dishes out it, to make tools out of, it was a malleable metal. And then you have, kind of in terms of a currency, people valued it as jewelry. People valued it because it was rare and it's becoming rare. So. As a thing of utility, it has value, right?
It has intrinsic value, which is very rare in this world to have something that has intrinsic value, right? A phone doesn't have intrinsic value. It has value. 'cause it has power because you have the internet, because you have what you can do with it. So intrinsic value it's something that is hard to
quantify in a portfolio, right? This goes to the living with financial anxiety, right? It is not an objective reason to have it, it is a subjective reason to have it. The next category is owning it indirectly through an ETF. So an ETF and there's lots of flavors of them, but they basically indirectly own gold or they are tied to the price of gold.
There are lots of ads out there, advertising that is a great hedge to inflation. They say, well, value of gold doesn't change it, only goes up. Whereas the value of the dollar will go up and down. So there is this theory out there that a gold is a good combat inflation that has not been true since we've gotten off the gold standard.
There is a reason why the value of the dollar was very stable up until about 1950s when we got off of the gold standard. And the reason for that is that there was a finite supply of gold and it was controlled by armies. And so therefore, you knew exactly how much gold every country had. Nowadays,
the value of these gold ETFs have that indirect relationship the more directly correlated to the value of gold. However, because of marketing, they do act a little bit when there's inflationary concerns, you can own it and it will help as act as a counter rate as a diversifier in your portfolio.
It's kind of like buying, leveraged ETFs, right? Or options as protection. You don't want to have it all the time because if you have it all the time, all it does is erode the value of your portfolio, right? When the market goes down or the market goes up, then you're just gonna be all over the place and you're gonna end up worse off.
Leibel: What you wanna do is, if you think there's a period of volatility coming, if you think that there's a period where people are gonna be worrying about the dollar or worrying about inflation, then you can buy into it and own a little bit of a gold ETF to help offset potential losses in your portfolio. Doing those types of trades, you kind of need to have your eye on the market when it comes to commodities, right?
You gotta know where prices are going, where inflation is going. You gotta have a crystal ball. I personally don't have that crystal ball. I'm not monitoring these markets. I don't think most people are monitoring these markets. In fact, I can count on one hand the number of people who I've met in the financial industry as a whole who even understand how those markets work.
Now, I happen to be lucky enough that the ETF we launched is with a company. That is their entire business, right? That is their entire business is doing these commodities and trading them. And so they do have a crystal ball of when to buy in and when to buy out. And it's something that we do use their signals in for some of our clients.
But for your average investor, I don't recommend gold as an investment. Having said that, there is an interesting thing of owning gold, physical gold in your IRA accounts, whole different ball game? Do I think you should do it? I don't know. But it is something that if you feel inclined to do it, I would be more inclined for you to own it in your IRA account than just to have physical gold.
'Cause physical gold like doesn't really help you. And there's ways to have it in your IRA account where you have access to the physical gold, but at least it's, tax deferred dollars. And when you go to sell it right, it's tax deferred and there's some kind of value to it being there.
Freddie: So talk to me about the risk and the drawbacks of investing in the gold ETFs that retirees should understand. And is there a point in your age, even though you may not be at retirement, that gold, whether it's an ETF or a physical gold doesn't make sense for the portfolio?
Leibel: So I don't think owning it as an asset class by itself ever makes sense.
I don't think that we live in some kind of dungeons and dragon game where you should have a purse full of gold, right? And it's, you have gold, you have gems, you have whatever, right? Like, no, I, I don't think that is a thing. I think that if you wanna have commodities, if you wanna have commodities in your portfolio, I think there's a very strong argument to be made to have that right.
And that goes to diversification. But diversification is not a means to an end it isn't a reason in and of itself. Right? Like you don't wave a magic wand. I want to be diversified. And so therefore you buy, your gold and silver and whatever you need to have a reason to be you diversified.
Which that I think. That is lacking in our asking that question first of, should I be diversified? If I should be diversified, why am I being diversified and what's the purpose of it? And then you, once you have that, then you can say, okay, what are the tools to diversify? And commodities may part of that.
Private equity may be part of that. Real estate may be part of that, right? There's owning businesses may be part of that. I'm a lot more inclined to tell people to own a business than to own gold, because gold metaphorically will make you feel like you have a shiny object. But a business will actually give you tax deductions and will actually give you gold in your bank account.
So, I'm a lot more inclined to owns something that gives you real value than theoretical value.
Freddie: It's hard to sell the prestige, but besides gold, and I think you've touched on it beside the gold ETFs Leibel, what other conservative, or, I don't know, maybe even alternative investments make sense for someone right now in retirement?
Leibel: So, yeah, so when we look at kind of the spectrum, especially things that are, if the goal is to fight inflation, right? Is it to combat the loss of the dollar, then I would rather look to things that are negatively correlated to the market. So whether that is going to government treasuries or that is or that's holding fixed income investments or that is holding things like we own.
We own a number of things that are inflation hedged, that rise when there's expectations that interest rates will go down, this goes up in value. Why does it go up in value? Because it holds things that are designed to go up in value when interest rates go down, right? And so it has a negative correlation, not a hypothetical negative correlation like gold.
'Cause gold doesn't actually have a negative correlation. But you can get contracts that are negatively correlated, right? The price goes up when the value of when interest rates go down. And when you have that, now all of a sudden you've built kind of a buffer into your portfolio. And so I'm a lot more inclined to doing that or holding investments like
preferred shares where you have a guaranteed dividend, and so when the market goes down, you know you're getting your dividend payment. But at the same time, if the market goes up, it's gonna increase in value. It's not gonna increase in value the same amount but at least you get compensated for that risk that you're taking.
Freddie: Makes a lot of sense. Tell us what we'll find at yields4u.com about gold physically, and also gold ETFs.
Leibel: Well, yields4u.com, you're not gonna find much about gold or gold ETFs. Okay? Usually I say there's all kinds of resources. This is not one that we've got on our website. There is a reason why you're not gonna find it because I am not a big proponent of it.
If, however, if you do if you are interested in holding gold in your IRA accounts or you have gold and you're wondering whether you should sell it, because the value of gold has increased dramatically in the last few weeks. And in fact one of the results of the tariffs there's this arbitrage opportunity where bankers are flying from London to New York to sell their gold because the price of gold is so dramatically different that it pays for them to fly a bar of gold, physically carry it from London to New York and sell it in New York.
So if you do have physical gold, now may the time to exit. Interesting. And if you're interested in talking that through, more than happy for you to have you book a call and we can walk through it.
Freddie: He's Leibel Sternbach. And I'm Freddie Bell. Thank you for joining us today and we hope we gave you some gold nuggets to think about and that when it comes to protecting your retirement. Don't forget to subscribe and we'll catch you the next time with more ways to make money and make your money work smarter for you.
For Leibel Sternbach, I'm Freddie Bell, and this is Leibel on Fire!
