When it comes to thinking clients, many of them find that they are initially quite enthusiastic about obtaining exposure to physically held gold and other precious metals. What invariably happens is they get into a conversation with their financial advisor and begin to have cold water dumped on their heads in the form of numerous objections. The reaction from many a financial advisor to a client’s burning desire to include gold in a portfolio all too often comes down to one of several unfair responses, like:
• Why would you even consider owning an asset that does not pay any sort of yield?
• Gold rings are a great investment in your future, gold coins and bars are a complete waste of your time…
• Even dentists no longer use gold to fill teeth, why would you want to bother with it!
• It’s fine if you want to speculate with your money, but don’t you dare call buying (especially physical) gold investing!
Today we will go through some effective responses to help win over your financial advisor in your plan to acquire some physical gold with a portion of your retirement or investment portfolio funds. It is important to convince your financial advisor in this cause. If you do not, you can be sure that he or she will be constantly watching your gold holdings expenses versus returns and trying to convince you to cash out whenever you are underwater and your stock/bond portfolio mix is having a day in the sun.
Why You Would Want to Enlist the Support of Your Financial Advisor in your Quest for Gold Holdings in Your Portfolio
You and your financial advisor are a team, and if you are fortunate, a seamless one that works well together at that. Many of these professionals can be convinced in theory that gold and the other precious metals provide a hedge against chaotic economic times, inflation, currency devaluation, or volatile stock and bond market performances, even if they believe the yellow metal to be imperfect in practice. The truth is that they will never approve of the fact that your hoped-for physical gold inventory will never earn interest or receive dividends of any kind as would traditional asset classes.
This is why your goal is to convince them to go along with a relatively small allocation to gold, somewhere from five to 25 percent maximum. Once you get them on board with this idea, you will find your client review conversations proceed a whole lot smoother both in times when gold is basking in the glory of its outperforming traditional assets in the middle of a financial crisis or other geopolitical mess as well as when gold is down for the proverbial count temporarily. It will always be difficult to win them over on the idea of physically holding gold though, just because a smart financial advisor will not want you to have to earn still greater price appreciation in your investment just to cover storage and safekeeping fees for the gold.
Here are several good responses you can work on for the big confrontation with your financial advisor on putting a portion of your assets into physical holdings of the yellow metal.
I’m aware that it doesn’t pay dividends, but that’s not why I’m investing in it
First of all, you must be prepared for the credible and intelligent argument they will throw at you regarding the lack of dividends or interest on your physical gold holdings. You can not win this debate on its own merit. Acknowledge that you are not investing in gold to earn a steady return, rather you are interested in owning a worthy hedge against chaotic economic events or runaway rampant inflation. Gold and commodities in general are still considered to be alternative investments. These make a strong pillar in your portfolio, so long as they are not the only such pillar holding up your investments. This is why you diversify into gold holdings, not sell your entire paper portfolio to cash into a tangible yellow metal hoard.
I just need a security in case of a systemic collapse
Do not let your financial advisor tell you that gold is a pet rock only suitable as a hedge for investors who live in a small third world nation. It is true that this is a good category of investor for gold and the precious metals, but anyone who is a considering, reading, thinking person should be concerned about the possibility of a systemic crisis or even collapse even in the developed world. Remember that no empire in world history has lasted forever. In fact, most nations and empires have averaged around 250 years from rise to fall. The U.S. is as close to 250 years now as matters, and the major Western European powers are well past their average life expectancy by centuries already. No financial advisor in his or her right mind will argue with the fact that gold can and does perform well as a store of real value in times of economic and/or political distress.
Hasn’t gold held its value better and/or appreciated more than most any other asset class over the longer term?
This is a constantly debated topic, with neither side ever able to convincingly claim victory and strike down their opponents on the subject of whether gold has outperformed both inflation and the major asset classes of stocks and bonds. This chart below makes a convincing case for owning gold at least since the U.S. (and rest of the world more or less) abandoned the gold standard for the final time in 1972 under then-President Richard Nixon. Look what happened to gold prices in inflation adjusted terms from the early 1970s through the financial crisis of 2008-2009 and everything after:
A simpler way of understanding this argument lies in the value of gold example from one hundred years ago versus today. If in 1917 you owned a one ounce gold coin, its value was then fixed at $20 US dollars. This would buy you a high quality personally tailored suit in New York City or London at the time. Fast forward to 2017, when that same gold coin is worth over $1,100. That price will still fetch you a handsome designer or tailored suit and then leave you something left over for a nice dinner out as well. Has gold held its own value over the past century? The convincing answer is that these numbers do not lie. Has the U.S. dollar held its value relatively well in that time frame? Gold was fixed at $20 per ounce a hundred years ago. Today it rangers in the $1,100 to $1,350 per ounce range. RIP dollar.
More recently, gold has outperformed stocks and bonds in a typical 60 percent/40 percent mix of the traditional asset classes in four out of five years of the Great Recession and financial crisis from 2008 to 2012, as you see in this chart. This is the case whether you compare straight gold holdings to the traditionally mixed 60/40 portfolio or compare a portfolio with a 25% gold component:
As to whether or not it has outperformed stocks and bonds over the longer term, the answer is murkier. It depends on to which stocks and bonds you are referring. There are a number of individual securities whose underlying companies did fantastically well over the decades, such as Gillette, IBM, and General Electric. There are far more corporations and firms that failed, went bankrupt, or never really amounted to much, along with the prices of their stock shares. As far as the S&P 500 itself goes, it is easy to understand the returns on the index comparative to gold over the past century:
What this tells you is that depending on your timing of entry into and exit from U.S. stocks, you might have outperformed gold over the longer term if you were trading the S&P 500 basket or an ETF religiously based upon it. The same is true for gold. Remember though that you are not trying to convince your financial advisor to entirely abandon the traditional two main asset classes of stocks and bonds from you overall portfolio. Instead you only want him or her to agree to let you put somewhere between five and 25 percent of your portfolio funds into physical precious metals.
Can You Name Another Asset That is Not Tied to the U.S. Dollar and Economy?
This is an argument which will leave your poor financial advisor speechless. The answer is almost resoundingly no, with the exception of international stocks and foreign corporate or sovereign bonds denominated in another currency like euros, pounds, or yen. Given the choices of gold or foreign denominated and based assets, most financial advisors will not love the idea of these foreign denominated and based assets as a hedge. Once you show them the inevitable alternatives to a physical gold hedge, they are a lot more likely to cooperate and finally see your point of view.
Then move in for the proverbial kill by asking your financial advisor, “What is going to protect my portfolio during the next financial crisis if I have no precious metals within it?” When they are silent, give them a moment’s pause for maximum effect before delivering the coup de gras with this appropriate final analogy. “If you were a football coach, would you play a team without any defensive line?” Then reassure them that you will not either.
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Gold has always been a valuable commodity and it continues to be highly sought after today. Having a gold IRA is a great investment and allows you to invest in precious metals from your own retirement account and diversify your portfolio.
What is a Gold IRA?
In essence, owning a gold IRA is like owning your own golden goose as it turns your retirement savings from paper fiat currency to real gold and other precious metals. In 2000, an ounce of gold was worth $272.65 and now in today's time, an ounce of gold is worth over $1,200. If you had invested in gold in 2000, you would have made almost a thousand dollars for every ounce of gold you owned.
Typically, traditional and Roth IRAs procure investments in paper like stocks, bonds and cash, in contrast, Gold IRAs allows you to invest in physical ownership of gold, silver, platinum and palladium, all resources that meet the requirements established by the Internal Revenue Service (IRS). Additionally, with gold IRAs, your gold or other precious metals are stored with an IRS-approved depository.
Why is Gold a Good Investment?
Despite reports saying otherwise, gold is a solid long-term investment for several reasons.
History of Being Valued
If you were to go back through history and study fiat money, which is paper currency decreed as legal tender by the government, you will see that it has a relatively short life expectancy of less than forty years. Currencies have collapsed and continue to collapse throughout the world. Fiat money has no value apart from a government decree and is highly unstable, it is vulnerable to devaluation and debasement as well. Once a currency collapses, any paper you own in that currency is worthless. Gold, on the other hand, has remained valuable throughout the ages.
Instability of the US Dollar
The US economy has been especially precarious since former President Nixon abandoned the gold standard, and it continues to be so today. One of the reasons the USD looks stronger is because the US Dollar Index matches it up with six other countries economies, and those economies are hurting as much or more than the United States. To off-set the crippled economy during the financial crisis of 2008, the Federal Reserve initiated three rounds of quantitative easing, which prevented the complete collapse of the USD. However, on its own and without constant intervention, the USD is relatively weak. Gold does not have that problem and its value continues to rise as the world's economies struggle.
Insurance Against Inflation
Gold performs exceedingly well, especially in times of inflation, deflation, hyperinflation and stagnation. Diversifying your retirement portfolio protects your purchasing power by hedging against inflation. One of the side effects of the Federal Reserve's quantitative easing and other countermeasure initiatives is continued inflation. As a general rule, as the USD decreases in value, gold's value increases.
Scarce Commodities are Valuable Commodities
Unlike the US dollar, which the Federal Reserve continues to print and sell back to the government, gold can't be made from thin air. Production from gold mines has steadily declined since about 2000, and most gold sales come from the vaults of central banks in the form of gold bullion. Any time there is a limited supply of a commodity, it is considered scarce. A basic rule of economy is, the more scarce a commodity, the higher its value.
Supply and Demand
The nature of supply and demand is also a basic economic rule. As gold has a limited supply, its value is also dependent on the demand for it. Gold has seen an increased surge of popularity since the 2008 financial crisis. Demand for gold is rising not only in countries like India and China, but among investors as well. Just as with scarcity, the more demand there is for a product, the higher its value.
Diversification is Essential
In order to reduce the risk and volatility of any market, your portfolio should be properly diversified. An integral part of diversification is investing in stocks that are not closely correlated, or that responds opposite of each other during financial up and down swings. For example, during the 1970s, it was a terrible time for stocks, but a great time for gold, in the 80s and 90s, the opposite held true and in today's time, stocks are dropping as more investors are migrating toward gold.
What About Gold Ira Storage?
With a gold IRA, you invest in physical gold or other precious metals, so it is vitally important to choose a trusted gold IRA firm with an IRS-approved depository. There are two ways of buying gold, you can either buy and store it yourself or you buy it and have someone else store it for you. When you purchase gold through your retirement accounts, you never hold the physical gold in your hand, so this is an area where many people fall prey to countless scams. You must ensure the company is highly rated, holds a flawless reputation and is one you explicitly trust.
Which Gold Ira Firm Should I Choose?
Regal Assets is a gold IRA firm that was founded in 2009, and since then has become America's #1 rated gold company seven years in a row. With an A+ rating from the Better Business Bureau (BBB) and zero consumer complaints and an AAA rating from the Business Consumer Alliance (BCA), you know you are not only investing in a good product, but also in a reliable firm that values its customer. A good rule of thumb to follow when investing is if you can't hold it, you don't really own it. Regal Assets is the first company to offer a live video feed of when your precious metal arrives at the depository. Whether you want to open a new account or rollover an existing account, choose an established gold firm with a solid reputation like Regal Assets.
Investing in a gold IRA, diversifying your portfolio and hedging against inflation and market volatility is a smart way of making your retirement account work for you and to ensure your wealth is there when you need it.
Everything You Need To Know About The Process Of Rolling Over Your Current IRA Account To A Gold IRA Account
Unlike a traditional IRA, a gold IRA allows the account owner to invest in approved gold assets including coins and bars, which are held by an approved custodian for the benefit of the investor. Apart from this, a precious metals IRA functions in more or less the same way as a regular individual retirement account. Below is everything you need to know about the process of rolling over your current IRA account to a gold IRA account.
The Rollover Process
You can effect an IRA rollover in two ways:
To execute a direct rollover, you have to inform your current IRA custodian of your intention to transfer your contributions to a new custodian that allows precious metal investments. According to the Internal Revenue Code Section 408(a), such a custodian/trustee must be a bank, savings and loan association, federally insured credit union, or an entity that is approved by the IRS to act in such a capacity. With this in mind, the new custodian you have chosen should give you a precious metals IRA application form to fill. This is in addition to a document directing your current custodian to close your current IRA and transfer the funds to the new custodian. The beauty of such an arrangement is that the two custodians handle the bulk of the relevant rollover processes including opening a new individual retirement account, funding it, and closing the old one. In most cases, it takes two weeks or even less to complete transferring retirement funds.Financial experts recommend a custodian-to-custodian transfer because it is tax-free.
An indirect rollover involves taking distribution of your retirement funds and then depositing them in a precious metals IRA. However, this strategy has several disadvantages. For starters, the IRS requires custodians to withhold 20% of the retirement savings withdrawn indirectly for federal taxation purposes. In addition, the IRS requires individuals who execute an indirect rollover to deposit the funds in a new retirement savings account within 60 days. If you fail to do so, the IRS will treat the distribution as ordinary income that is subject to ordinary tax rates and you must include it in your annual tax returns. What's more, you must top up the 20% federal tax withholding with your own money. Nevertheless, you can still complete a gold IRA rollover if you do not have the money to top up the 20% difference. Unless you have solid financial footing, it is advisable to avoid an indirect rollover because it could lead to taxation and legal issues if you do not comply with the IRS regulations.
The Benefits of a Gold IRA Roll Over
A gold IRA account gives you greater flexibility in diversifying the assets held in your retirement account. This is important because most traditional individual retirement accounts tend to be heavily biased towards stocks, bonds, and mutual/hedge funds. The problem with such an investment approach is it increases the risk of wealth erosion in the event of stock market or economic downturns. For this reason, financial experts and planners recommend diversification when investing in tradable assets. Take note diversification strategies vary depending on an investor's risk appetite and goals. Nevertheless, most investment advisors recommend apportioning 10 to 30% of an investment portfolio to precious metals such as gold.
Enhance retirement portfolio liquidity
Gold is an easily tradable precious metal due to high global demand mostly driven by Chinese and Indian consumers. Moreover, gold is a finite commodity with wide ranging applications especially in the electronics industry. For these reasons, finding a buyer should you want to divest in the future is very easy. This approach may be more desirable than selling highly valuable stock holdings such as Berkshire Hathaway shares.
Peace of mind
It is also worth noting that the IRS has strict regulations on the quality of gold that can be held in a precious metals IRA account. For instance, gold coins and bullion must satisfy the criteria defined in the Taxpayer Relief Act of 1997. One of the key requirements is ensuring that the gold assets in your precious metals IRA are at least .9995 pure. This means you do not have to worry about the quality of the gold assets you are buying. In addition, you do not have to prove the authenticity and quality of your gold assets to buyers in the future. Your custodian can also take care of gold storage in a secure facility that complies with the applicable regulations. While these aspects may seem trivial, they ease the hassle of executing financial transactions. Remember seniors may not have the energy, time, and mental clarity to resolve highly complicated transactions.
Although the US dollar is one of the most valuable and stable currencies, it is still prone to periodical volatility due to market pressures and monetary policies adopted by the Federal bank. This may make it financially unwise to sell if such an event occurs at a time when you had planned to divest. To avoid such an outcome, savvy investors always increase their gold asset holdings whenever they anticipate currency volatility.
Easy rollover process
Unless you opt for an indirect rollover, the entire process is very easy meaning you do not have to worry about being hobbled by bureaucratic red tape. In addition, most precious metals IRA custodians offer guidance and expert counsel to traditional IRA owners who may want to carry out a rollover. To top it all, assistance is usually free. Besides this, your custodian will keep you abreast of progress and new developments during the transfer process freeing you to focus on essential tasks such as work or parenting. It is also possible to execute an IRA rollover entirely online without ever travelling to meet any of the custodians involved in the process.
A gold gold IRA transfer is beneficial in several ways including an easy rollover process, hedging against currency volatility, enhancing the liquidity of your investment portfolio, asset diversification, and peace of mind. More importantly, a custodian-to-custodian rollover is tax free, which means you do not have to worry about huge transactional costs.
If you are looking for financial security, you should invest in gold. This is because gold is a very safe commodity for shrewd investors. Below is an overview of the history of investing in gold.
Gold Investments Through The Ages
The first people to invest in gold were the ancient Egyptians. Around 3500 BC, Egyptians were already using gold for ornaments and statues. Gold was also widely used as money in Egypt around this time. Gold coins were used as a medium of exchange in ancient China. These coins were called Ying Yuan and were in existence for about 800 years during the Zhou Dynasty. At the height of its power in 120 AD, the Roman Empire used gold bullion as a medium of exchange. This currency was one of the abiding contributions of the Roman Empire to civilization. The modern world operated on the Gold Standard from the mid-1800s to 1914. This period was a time of peace, prosperity and employment. The boom experienced during these years can be partly attributed to the adoption of gold as a strong and stable money system.
Gold Investments In The Present Era
Since the year 2000, gold has remained the precious metal of choice for shrewd investors. Financial crises and the volatility of the stock market have made gold one of the safest investment on earth. Gold prices have continued to rise consistently and many investors have turned to this precious metal because it provides a safe haven in cases of recession, depression and a stock market crash.
Why Gold Is So Valuable
Gold is valuable because it is relatively scarce. Gold is also valuable because it has many uses. This precious metal is used in making jewelry. It is an excellent conductor of electricity and this is why it is used in electronic devices like computers. It is also used for cell phones and space craft. Gold bullion is recognized as a store of value and this is why many nations and central banks use gold to back up their currencies.
Investing In Gold
You can invest in this precious metal in different ways. You can buy gold coins and keep them because the value of these coins will rise with time. You can invest in gold bars and you can also buy jewelry made of gold. You can also buy stocks in gold mining firms or buy gold ore. These are very smart investment moves but the most popular gold investment in gold IRA.
Understanding Gold IRA
A gold IRA is an Individual Retirement Account where physical gold or other precious metals are held for the benefit of the account owner. This is a regulated account and it is a very safe investment because you are not investing in stocks and bonds but in gold bars and gold coins. Some of the advantages of the gold IRA account are portfolio diversification, and long-term security. Another advantage of this special gold investment is that it serves as a hedge against inflation.
Choosing The Right Company
Gold IRA is an excellent investment move but this does not mean you should entrust your cash to just any company that offers this service. You need to do a bit of research so that you will find the firm that is just right for you. Below are some qualities to look out for when you go shopping for a gold IRA firm.
Look for accompany that has a track record of achievement and invest your money with them. Ensure you get objective views from present and former customers because these are the people who will give you authentic information.
In every business relationship, transparency is vital. Do not entrust your money to a company that is reluctant to give you vital information upfront. It is in your interest to deal with people that will answer all your questions and explain things clearly to you.
You should deal with a company that has qualified and experienced staff. You should also ensure that the firm you have chosen is licensed and certified by the right regulatory agencies. In addition, you should verify that your investments have insurance cover in case the unexpected happens.
When it comes to gold IRA and gold IRA roll over, one size does not fit all. Discuss your needs with experts at the firm you have chosen and be sure they can provide the right service before you take the plunge. If the experts offer you a program that is radically different from what you have in mind, you should turn it down politely but firmly.
Gold Is Not Subject To A Market Crash
Your gold IRA is your passport to financial security. Gold prices have been rising steadily for some years now and this trend is likely to continue. If you invest in gold now, you will enjoy great benefits in future. One of the best things about investing in gold is that it is more stable than stocks and bonds. Stocks have boom times and down times and these things are not always easy to predict. Invest in stocks at the wrong time and you may lose a substantial part of your holdings. You might even lose all your capital if you get caught on the wrong side of a stock market crash. Over the years, investors have lost millions and possibly billions of dollars in unexpected stock market downturns. The American stock market crashed in October 1929. Investors also lost big money during the recession of 1937-1938. The Brazilian market crash of July 1971 was a huge blow to investors in Brazil and other parts of Latin America. Global markets also tumbled in June 2016 after the United Kingdom voted to leave the European Union.
Why Gold Investment Is Safe
Unlike the stock market, a gold market crash is not ever likely to happen. In fact, gold prices appreciate during periods of economic crises. Gold prices also rise in times of economic prosperity and stability. This makes investing in gold a win-win situation for the smart investor. Invest in gold today and you will be taking a huge step to financial security.