Table of Contents
If you have any experience investing in stocks, then you’ll know how fickle the market is. It’s not uncommon for a successful stock to plummet because of external factors outside anyone’s control. Risk is always a factor when investing in the stock market, and if it suddenly grows unstable, so will your finances.
However, there are methods available to protect your IRA (Individual Retirement Account) from instability in the market—the most reliable one is diversifying your portfolio by purchasing precious metals. Investing in things like gold, silver, palladium, or other valuable materials offers excellent, long-term financial stability, even when the stock market isn’t at its healthiest.
Ultimately, while precious metal investments do serve as excellent protection for your retirement fund, they offer several other benefits that are more complex. We know that you wish to invest your money wisely, so below, we’ve broken down the many benefits precious metals have to offer your portfolio and retirement.
When just starting to build your portfolio, one of the most common pieces of advice you’ll hear is not to put all your eggs into one basket. The various financial interests you can put your money in have multiple benefits and costs for you to consider. They behave in different ways and can react to poor economic times in wildly different manners.
Staking all your wealth on one sector will lead to disaster if the market takes a sudden turn. However, putting money into multiple sectors usually means that you’ll have a cushion available in case of hard financial times.
If you’re already looking to diversify your portfolio, there are several options available. However, if you’re looking for the maximum amount of financial security, precious metals are the way to go. The value of things like gold and silver aren’t strongly impacted by the stock market fluctuations and retain their worth even during lean times.
While your other assets may take a hit, an investment in precious metals proves to be a reliable method of weathering the storm as a whole.
Huge Potential for Growth
Not only do investments in precious metals cushion you from economic fallout, but they can also bolster your wealth. Investors typically use stocks, bonds, and mutual funds to fill an IRA; however, external market forces heavily influence them. Meaning that while a good economy will raise their worth and the value of retirement, the inverse is also true and can lead to harsh financial consequences.
Diversifying your IRA into precious metals is a good way for your account not to lose all of its value in a worst-case scenario. Additionally, investors naturally view things like gold, silver, and platinum as holding value. Not only do they tend to retain that value in poor economic times, their worth rises as people attempt to convert their resources into something physical to mitigate losses.
So, not only does buying into precious metals insulate your IRA from financial trouble, it gives you a quick way to bounce back (or even thrive) once the economy is back on its feet.
Most IRA’s use stocks or bonds, which is documentation given to investors representing greater monetary value. They have their advantages, being easier to transport than large stacks of money chief among them. However, these documents are typically accounted for by the government or other financial institutions.
Precious metals are a tangible commodity, and their purchase doesn’t need verification by an authority, as long as:
- The total cost of the transaction doesn’t meet or exceed $10,000
- The purchase ISN’T made with tangible US currency (including bills, checks, and money orders)
If a transaction does not meet both of these requirements, the law requires the dealer to file an 8300 form with the IRS and a Suspicious Activity Report with the Financial Crimes Enforcement Network. However, avoiding those prerequisites and using a reputable gold buying service keeps your purchases confidential.
Precious Metal IRA
Now that you know a few of the benefits, maybe you’d like to start allocating precious metal resources for your retirement fund. The process is relatively simple; however, it still requires specific resources and strategies to get the most out of a precious metal asset. For example, a precious metal IRA is essential for any investor who wants to start investing in gold or silver bullion.
It’s a particular form of a typical retirement account that allows you to invest in non-traditional assets like art, real estate, and precious metals. It comes with a few more caveats than a regular IRA.
Opening an IRA requires an IRS-approved custodian to hold it for you. A custodian will act as the middle man for any precious metal purchases while also handling storage and record keeping. Custodians are usually banks or official trust companies.
Finding a Reputable Dealer
You’ll then have to choose a precious metal dealer. It’s your money on the line when purchasing, so it’s essential to do your research before settling on a dealer. An excellent way to tell if the precious metal seller is reputable is to check if they belong to any official trade groups such as the Industry Council for Tangible Assets.
There are also additional fees to factor into your choice. Some (but not all) precious metal dealers have initial start-up costs when creating an account. Additionally, since you’re buying a physical commodity, the dealer will also charge a storage fee. Both charges can vary from company to company, as well as the service they provide. Make sure to research your options and find one that fits your needs.
Once you have a custodian, precious metal dealer, and a storage location for your new investment, everything else is mostly automatic. Your custodian will send your reports showing the status of your precious metals and how their value has changed over time. Any further purchases of precious metals will go directly through them.
Types of Precious Metal Stocks You Can Invest In
There are several kinds of precious metal assets available for an investor. Like most investments, each comes with benefits and risks to consider before purchase. However, they all share the same resistance to market trends and make good long-term holdings for retirement.
An ETF or Exchange Traded Fund is an alternative to direct ownership of tangible precious metals. Instead, it allows you to invest in gold, silver, and platinum-backed assets. The market value of precious metals highly influences the worth of these assets, providing an easy method of determining the health of your investment.
ETFs allow for cheaper access to otherwise expensive commodities without needing to pay periodic storage and custodian fees.
Bullion is a physical quantity of precious metal. Usually kept in the form of ingots or coins, a bullion’s worth is typically determined almost entirely by its metal’s purity, generally ranging from 99.5% to 99.9%. While governments and banks most often use bullion as a method of protecting their monetary assets in case of an economic crash, you’re free to invest in them to protect your retirement fund.
When purchasing tangible precious metals, a good rule of thumb is not to limit yourself to only investing in one. Like your portfolio as a whole, diversifying where you put your money is the best way to reduce risk and mitigate losses.
Purchasing mining stock functions much like buying stock in other companies. However, because their success is tied directly to the market health of precious metals, they can weather economic downturns better than most other businesses. Though, it would be best if you use caution when investing in a precious metal mine.
While precious metals’ increased worth can bolster the profits of a mine and add to its market value, a decrease in the price of platinum or gold can drive shares down. If a commodity’s value remains low for long enough, it could even cause a mine to go bankrupt.
A precious metal certificate is another way to invest in gold, silver, and palladium without purchasing physical assets. Like ETFs, buying a certificate is an excellent way to avoid high storage costs as well as monthly custodial fees. However, they aren’t as reliable as ETFs because they’re ultimately notes of exchange with the certificate’s issuer.
Essentially, a bullion bank provides a certificate worth a certain amount of precious metals but doesn’t give you direct, legal ownership of the physical asset. If the bullion bank goes out of business, there’s no guarantee you’ll see a return on your investment.
While there are many options and factors to consider when investing in precious metals, they remain one of the best diversification options available. The inherent value in the various metals ensures that your investment will remain stable even in times of unrest or economic crash. While the initial investment may seem like an exorbitant fee, their vast potential for financial growth means you’ll easily make your money back.