“It’s worth its weight in gold” is a familiar saying to describe the value of an object or idea, but why is this saying used? Because gold has the longest history of being used as a precious metal and a desired commodity dating back to the ancient Egyptians. To this day gold is highly sought after as an investment tool due to its value increasing with inflation and the physical nature of the investment as opposed to an electronic record of credit.

Why invest?

A precious metal IRA is an effective way to diversify your portfolio; it introduces a physical investment that increases in value with inflation and can increase exponentially with the global market demand. The reason it increases in value with inflation is because it is a physical investment; the value of gold or silver can’t just be changed to meet market demands like paper money can. A gold or silver IRA is a physical product held at a secure location and once it is opened, the investment can be sold for the current spot price or shipped directly to the investor for their personal use.

Who should invest?

Due to the ability to liquefy your precious metal assets quickly and the availability of companies that specialize in converting traditional IRA’s, 401K’s and other retirement plans into precious metal investments, anyone is eligible for a gold or silver IRA. However, putting all of your eggs in one basket is never a sound investment strategy and precious metal IRA’s should be used as a diversification strategy. Precious metal investing is perfect for people looking to stabilize and diversify their current investment portfolio.

The Differences between Gold and Silver:

Silver is a great entry point, it’s less expensive than gold, but still provides a solid investment that grows with inflation. Silver has a strong industrial demand due to its electrical conductivity and ability to endure extreme temperature ranges. This ensures that the demand for silver, and its value, remains consistent while the global demand for silver causes the growth.

Gold is slightly different, for one it has a higher entry point due to the increased value over silver and is less dependent on the industrial market for its value. In addition, gold is considered a long term investment, generally 5-20 years with a 10 year minimum being suggested.

How to Invest:

Investment is rather simple; an existing retirement account (types of accepted accounts vary by company) can be rolled over into an IRS-approved precious metal IRA. If that doesn’t suit your needs, a new account can be created and an investment built from the ground up. A great starting point is contacting various investment agencies and American Bullion has a great set of questions to ask when deciding to invest in precious metals. Additionally, there are several options for IRA’s, each with their own benefits and limitations based on age:

  • Traditional IRA: Annual contribution limit of $5,500-$6,500 (pre-tax) per year and tax is differed until withdrawal.
  • ROTH IRA: Post-tax annual contribution limit of $5,500-$6,500 and is tax free if withdrawn after age 59 and a half.
  • Simple IRA: A savings plan in which employee contributions are matched by the employer. There are typically limits to how much the employer will match, but no limitations on how much the employee can contribute.
  • SEP IRA: Simplified Employee Pension (SEP) is similar to a simple IRA except for self-employed individuals.
  • Self-Directed IRA: A retirement account that permits the account holder to make investments on behalf of the retirement plan; most flexible and investor-controlled form of an IRA.

Whether looking to diversify a current portfolio, rollover a 401k or convert an existing IRA, investing in precious metals is an excellent strategy to provide stability and robustness to an investment plan. With the stability and options, precious metal investment is an excellent insurance against the current fluctuating market and instability of the dollar value.

David Parkman is an avid numismatist who started collecting coins as a hobby and moved into investing in gold and silver American Eagles, Austrian Philharmonic, and Canadian Maple Leaf coins. He gained his passion from his grandfather who saw coins as a window to history and loved all things ancestry related.

Comments are closed.