Dave Ramsey Says Gold 'Sucks' as an Investment — Do This Instead With Extra 401(k) Cash

There will be instances when individuals must make mandatory annual withdrawals from tax-deferred 401(k) accounts. This is calculated by dividing the previous year's ending balance by the applicable IRS life expectancy factor.

This means people can gain some additional income. However, there may be cases where they do not urgently need these funds. In such situations, a good approach would be to invest the extra money elsewhere. Could gold be a wise investment?

Regarding this, financial adviser Dave Ramsey considers investing in gold to be a mistake. He emphasized this point when a caller asked him if investing in gold was a good idea.

'No, no, no, no, we don't put anything in gold,' Ramsey declared.

Ramsey described gold as nothing more than a yellow rock. He further explained that it performs erratically, and the risks of achieving a good return from that investment are high.

'If you look at the price of gold on a chart, it's way up and way down, much more than the stock market is. It is a lot riskier, and it does not yield a good net return; the average annual rate of return on gold sucks,' the American radio personality explained.

Mythology of Gold Exposed

To further enlighten the caller, Ramsey discussed the value of gold and why there is nothing particularly special about it. He explained how prices increase when demand rises. On the surface, that may sound promising. However, he added that its value hardly ever changes.

'If a whole bunch of people rush towards gold, it creates a shortage and the price goes up, but the gold did not become more valuable, just more people were chasing fewer bars,' Ramsey quipped. 'There is nothing magical about it.'

Place Money on Real Investments

Although the caller admitted that thinking of investing in gold was based on a gut feeling, Ramsey advised that it would be better to focus on businesses that generate revenue and profit, mentioning companies like Home Depot, Microsoft, and Apple. He pointed out how the stocks of these entities increase, thereby creating revenue, unlike harvests and minerals.

'An investment that creates revenue is a company that's running and making a profit, like Home Depot, Microsoft, or Apple. Their stock goes up because they are creating revenue. Gold, corn, and oil do not create revenue; they only trade based on scarcity and the psychology of the marketplace, greed and fear,' he explained.

Gold Investment Rate of Return Hardly Rewarding

It wasn't the first time Ramsey was asked whether investing in gold was a good idea. About 10 years earlier, a caller named Gary from Mesa, Arizona, asked him on his show if it was wise to invest in gold or silver.

His response was hardly different. As with any investment, he advised the caller to examine its track record to determine whether investing in gold or silver would be worthwhile now or in the future.

At that time, Ramsey pulled up data for gold. Its value was erratic. He delved deeper, tracking gold's value over a 50-year timeline.

'You put $100,000 there and visit 50 years later. You would find that gold has about a 2% rate of return over that 50 years,' Ramsey said. 'It's done horribly.'

Clearly, gold as a potential investment is driven by the belief that it offers an opportunity to earn more money. But as Ramsey pointed out, it is mainly focused on trading and cannot be used as an immediate medium of exchange to buy essential needs in everyday life.

Disclaimer: Our digital media content is for informational purposes only and does not constitute investment advice. Please conduct your own analysis or seek professional guidance before investing. Remember, investments are subject to market risks, and past performance does not guarantee future results.