When preparing for retirement, many choose to invest their funds into more traditional assets like real estate, a 401k and IRAs. One investment that tends to get overlooked is precious metals.
That’s likely because other investments like stocks and mutual funds get most of the love and attention. However, there are several reasons why you should invest in precious metals—specifically a precious metal IRA.
Keep reading to learn what a precious metal IRA is, the seven benefits and how to invest today.
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What is a Precious Metal IRA?
You can think of a precious metal IRA as a branch of a self-directed IRA. Self-directed accounts are a type of IRA that allows people to invest in tangible assets typically not allowed in regular IRAs. These self-directed IRAs allow investors to purchase precious metals, art, real estate and other assets.
Many investing for their retirement turn to self-directed IRAs to create a more diversified portfolio while benefiting from rising metal prices and tax advantages.
Create a Diversified Portfolio
One of the long-term benefits of a precious metal IRA is that it allows investors to create a diversified portfolio that holds value over time.
The oldest saying in investing is never to put all your eggs in one basket. This is sound advice, especially for those nearing retirement age.
Although investing all your funds into one penny stock may result in substantial growth, it could just as likely result in a blown account.
Like the Japanese Yen and US Dollar, precious metals are safe-haven assets. The reason to diversify your portfolio and dedicate a portion of your account towards safe-haven investments is so that you stay protected in the event of an economic crash.
Even if the stock market never crashes in your lifetime, it pays to have a flexible portfolio that can absorb a few hits without much concern.
It’s More Than Gold
When people buy precious metals, the first one they go with is typically gold. Depending on your strategy, it may be wise also to diversify your precious metal holdings.
The good thing about a precious metal IRA is that you can invest in gold, silver and even palladium. This is a significant benefit compared to IRAs that only allow investors to purchase gold or silver.
A precious metal IRA allows account holders to monitor their tangible assets in one account. It removes the hassle of signing in and out from one broker to another every day.
There’s High Demand
As stated earlier, precious metals are more than a safe-haven asset to store wealth. The market value of each metal is also affected by demand—and demand is high.
For example, silver is in constant demand because of its use in innovative technology like solar panels and electric vehicles.
As new global renewable energy projects become the focus of governments worldwide, you can certainly expect a substantial rise in demand for precious metals.
In the event that demand exceeds supply, precious metals like silver may likely become more valuable than ever.
Inflation Protection
Fiat currencies are sensitive to market movements and decisions by global banks. The value can fluctuate and ultimately lose value over time. A great example of this is the Russian Ruble and its dramatic fall due to economic sanctions.
Paper currencies can also lose value due to inflation and constant printing to pay off massive amounts of debt over time. A precious metal IRA is one way to protect your retirement nest egg from the devastating effect of inflation.
Because even if the price of metal falls, governments can’t print more of them to keep up with demand. Therefore, you can rest assured that your precious metals will always be worth something.
Enhanced Control in Uncertain Times
Even when the stock market hits record highs day after day and there’s peace in the world, uncertain times can come out of nowhere.
That’s why it’s essential to have some control over your investments. Traditional retirement accounts are limited to publicly traded assets like mutual funds, stocks and bonds. The only control you have with these is when you can buy and sell.
A precious metal IRA offers an investor increased flexibility regarding profit control and the amount of risk an investor is willing to undertake.
Balanced Risk and Return
People with a high-risk tolerance may be able to stomach their account dropping over 1,000 percent in a single day.
For those who value their sleep, investing in precious metals can provide account protection and security. Gold, in particular, excels at being a form of insurance for many investors.
It typically comes with minimal risk and provides a cushion or insurance against other risky investments like stocks. Having precious metals as a portion of your portfolio ultimately reduces volatility in your account.
A Tangible Form of Wealth
In the world of online banking and the internet, nothing is ever truly private. However, precious metals can act as a tangible, portable and private form of wealth. Precious metals are easily accumulated and liquidated around the world.
Investing in a Precious Metal IRA
Once you decide to invest in precious metals, you must follow a few steps. First, you must open a self-directed IRA—one that allows tangible investments like metals and art.
Second, you have to fund your account to be able to purchase precious metals. There are several ways to fund your account. It can be done through a rollover, transfer or a straightforward cash contribution.
The third step is the most important. This is when you select your precious metals dealer.
When selecting your dealer, you must conduct due diligence. One way to start this is to go online and type in a company name and scour their reviews.
For example, you could search for noble gold investments reviews, SD Bullion reviews and so forth.
Once you make your decision on a dealer, you can then choose a depository to hold your metals and then make the purchase.
The final step is the transaction process which includes audits, packing the material and booking the metals into your account.
Protecting Your Nest Egg
Investing in a precious metal IRA can help protect your nest egg in times of turmoil like the war between Russia and Ukraine.
Unlike traditional investments that are susceptible to a significant decline in uncertain times, the value of precious metals remains steady or rises because they’re safe-haven investments.
Diversifying your investments is more than investing in stocks, bonds and metals. It’s best to diversify your precious metal holdings between gold, silver, and others to have a solid portfolio.
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