Is It a Good Idea to Convert Your 401k to Gold?

These days, the market seems like it’s doing great. Bullish trends have assisted 2 of the 3 United States blue chip indices in breaking their all-time records several times over the past year; with the third posting incredible gains as well. However, as always, what goes up eventually has to go down. As a good investor, it’s your job to figure out when the market is going to go up, and when it’s going to go down; all while making decisions that will allow your investments to grow as a result of your intuition. Today, we’ll talk about why I think we’re in for a market correction and why it might be a good idea to consider the “Convert 401k to gold” strategy.

Why I Think A Market Correction Is On Its Way

A market correction is anytime we see downward trends in the market resulting in losses of 10% or greater. There are currently several red flags that tell us that the possibility of a market correction in the near future is very real. Here are the three signs I’ve been watching the closest.

Geopolitical Issues – We all know that war tends to drive world markets down. That’s something that most of us experienced at the launch of the “War on Terrorism”. Well, today the terrorist issue is rising again. Every day, when I watch the news, I’m seeing more and more about the terrorist group called ISIS as well as several other groups that are becoming more active. Aside from the terrorist concern, there are also major concerns about Russia’s invasion of the Crimea Peninsula in Ukraine. As a matter of fact, the Russian/Ukraine crisis has grown to the extent that sanctions were placed on Russia and more action is being considered. The bottom line is that the geopolitical climate today is a bit gloomy.

High Stock Valuations – The higher the stock valuations are the more investors overpay when purchasing stocks. At some point, history tells us that investors will become wise to this mistake; ultimately prompting a sell off that will lead to a market correction. Today, stock valuations are dangerously high. The metric I use to track this is the Schiller PE ratio. In times of sustainable growth, this ratio is usually 16. Currently, it’s at 26.5; telling us that investors are currently grossly overpaying for stocks.

Worldwide Economic Climate – While things are going great here in the states, the Eurozone isn’t feeling the love. As a matter of fact, the multi-country currency is currently on the brink of a recession. When the world economy doesn’t do well, eventually that trickles down to other countries like ours.

Final Thoughts

After looking at the factors mentioned, it’s hard to argue that the bull market is going to continue for a long stretch. In reality, we’re looking at market correction relatively soon. By converting your 401k to gold, instead of losing money during the market correction, you’ll have the ability to realize gains!

Team Dinks