Creating wealth through investing requires an effective strategy that combines returns and profits with protection of capital. Many beginners make the mistake of thinking that smart investing is all about avoiding losses. Even investment gurus like Warren Buffet end up facing losses on their investments.
The trick to sensible investing is to focus on keeping losses as low as possible, and the simplest and most elegant way to hedge your risks and minimize scope of huge losses is to invest in precious metals through gold ETF, precious metal ETF, gold mutual funds, and precious metal mutual funds.
Why Precious Metals?
Investing in equity is a high-risk affair where you can either generate huge returns or can end up losing your entire capital. To hedge your risks, you will require an asset class that fulfills the following conditions:
• Reasonable returns over the long run.
• Protection from losses even when the economy does poorly
• Good liquidity so that you can convert your investment back into cash without any hassles
• Inherent value that will safeguard your investment during major economic troubles.
A look at asset classes other than equity, like debt securities like debentures, real estate, bonds, etc. shows that there is only one asset class that fulfils all the above-mentioned conditions---precious metals.
Shares, bonds, debentures---these are paper assets that derive their value from other underlying assets. Precious metals like gold and silver, on the other hand, have inherent value due to their scarcity. Between 1970 and 2016, gold has generated real inflation-adjusted returns of 3.7%. The period from 1980 to 2016 yields a loss of just 1.5%. While you may not earn blockbuster returns, you are assured that you won't lose too much either.
Finally, gold is probably the most liquid asset in the world. Shares of blue-chips of yesteryears may find no buyers today. Your land assets may appreciate in value but selling a parcel of land or a home can take a lot of time. Ever heard of a situation where somebody wanted to sell gold or silver but could not find buyers? There is your answer.
How to Invest in Precious Metals? Why Precious Metals ETFs?
Adding gold, silver, platinum, or palladium to your investment portfolio is a smart decision irrespective of whether you are a high net-worth individual with lots of money or an average Joe looking for a smart investment strategy. And the smartest way to invest in precious metals is to do it through ETF (Exchange Traded Funds) or Mutual Funds.
Buying physical units of gold, silver, or any other precious metal is not a smart move. A ten-gram gold bar will be just 2 cm in width and 3 cm in length. So easy to lose, right? Secondly, having physical silver or gold in your home will lead to inevitable security risks. You will have to buy a safe, install an alarm system, get insurance, and spend a lot to safeguard your investment. Finally, selling your gold investments won't be easy either since your options will be restricted by practical issues like transporting the gold to the buyer and other hassles.
Option 1 ---ETF
A precious metal ETF is like a share issued by a company with the difference that one unit of an ETF will represent 0.5 grams to 1 gram of the precious metal. So, you will end up owning 10 grams of gold or silver if you buy 10 units of a gold or silver ETF. The company issuing the ETF units will hold the physical gold or silver on behalf of all investors buying units of the fund.
As you can see, buying units of the gold ETF or a precious metal ETF is like buying gold, except that you need not worry about storing it, keeping it safe, or issues like transportation. The price of your units will increase as gold prices rise. You can sell the units on the stock exchange and recover your investment and profits whenever you wish.
Option 2--- Precious Metal Mutual Fund
Another option is to buy units of a Gold mutual fund or precious metal mutual fund. A unit of a gold mutual fund will represent units of gold ETF's, which, in turn, represent units of physical gold. So, if you want to invest in different precious metal ETFs at once but don't want to buy units of each ETF individually, you can opt for a precious metal mutual fund where a professional manager will allocate funds to different ETFs to maximize returns.
A precious metal mutual fund offers advantages like active professional management, greater risk management, and greater choice as compared to a precious metal ETF. However, the cost of investing in a gold mutual fund will be higher than simply buying units of a Gold ETF.
Just as equity investors can either buy shares directly or buy units of mutual funds that derive their value from equity investments, precious metal investors can choose to buy ETF units, which represent units of the physical metal, or mutual funds, which ultimately invest in ETFs.
Benefits of Precious Metal Investments
Buying ten grams of gold every month may be something that a high net-worth individual can consider. However, such an investment strategy may be beyond the reach of somebody who wishes to invest a few hundred dollars every few months into precious metals.
Buying units of a precious metal mutual fund or a gold mutual fund will enable all kinds of investors---big and small---to include gold, silver, and other valuable metals into their portfolio. The defensive nature of precious metals makes it a very good option for long-term financial plans like one's retirement, children's education, or even a second honeymoon at the age of 60 years.
You can make periodic investments, buy a few units every once in a while, minimize risk of huge losses during bad times, and enjoy decent profits when the going is good. Considering the benefits, you stand nothing to lose and virtually everything to gain by putting money into a gold ETF, a gold mutual fund, or in a precious metal ETF or mutual fund.
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.
Gold has retained its high value over centuries. It remains an excellent asset class for investment purpose. Its performance on a long term basis remains good. There are many reasons why gold investing is one of the best investment options for you.
Diversified Investment Portfolio
This is the first advice you will receive from any investment consultant. You must always have a diversified portfolio of investments. It protects you from the risk of losing value of a single asset investment. For example, there is no guarantee that prices of a share will remain high at all times. The same is the case with land, houses and other immovable properties. Values of all assets depend on various factors including prevailing economic condition, market movement and political scenario. The price of gold increases significantly when values of other commodities and currencies go down. You can protect your investment with the help of gold investing.
Most Acceptable Financial Commodity
You can sell gold anywhere in the world. It is acceptable in all economies, countries and communities. You will never face any problem selling your gold reserve anywhere. All entities accept it without any problem. Gold has remained the main financial reserve of all government central banks. It still remains the first choice of reserve for governments even when other assets like some currencies give better returns. Most governments invest a large part of their income in gold. They do not face any problem selling gold in the open market and getting a very good return on their invested money.
Always Increasing Price
Gold price goes down only in the short term due to various factors including fluctuations in the markets and economies. However, in the long term, the gold price has always been going higher and higher. This makes gold investing a favorite with all types of investors. It is the best hedge against inflation and deflation. Shares and stocks of companies may lose value so drastically that they are not worth the paper they are printed on. Such a thing has never happened with the gold. You will always get a higher price than what you invested in it.
Various ways to Invest in Gold
You are not limited to investing in one particular type of gold asset. Now there are various options. First of all, you can invest in physical gold including coins, bars and jewelry. Other options include vaulted gold, gold backed securities, gold stocks, gold options, gold futures, gold mining stocks, gold mining funds, Gold ETFs, gold ETCs, gold mutual funds, gold certificates, gold accounts and gold trusts.
Political and Economic Uncertainty
The gold price shoots up in times of global crisis caused by war, natural disaster, civil war, internal strife, political uncertainty or economic depression. Investors fleeing from other investment options flock to gold and its price increases. When people have less confidence in the economy and government, they start buying gold -- forcing its price to go up. Gold investing is the best decision you can take. It helps you avoid seeing all your investments lose value when a large level of financial uncertainty prevails at national and international levels.
Inflation and Deflation
Gold has always remained the first choice as a hedge against inflation. The price of gold soars when prices of all commodities, housing and cost of living increase. You are assured of high returns from your gold investment even when values of major currencies are going down. Gold investing proves a good option even in times of deflation when the economy goes down due to slowed business activities. When prices of all commodities are going down, the gold price keeps increasing.
Gold cannot be mined as much as required. The supply is constrained because there are only a few mines where gold can be produced in large amounts. Production of gold can be sustained only in those mines where large amount of gold can be produced. There are only a few such mines around the world. With limited supply and continuing high demand, the price of gold will remain high. This makes gold investing very attractive for investors.
No Drop in Demand
The demand for gold remains as high as it has always been. There is great demand for gold from certain developing countries like India and China. Most communities around the world have strong affinity with gold possession. Gold investing in these countries is connected to cultural, religious and traditional activities. It is the first thing they invest when they have some money to invest. It is the best hedge for them against future financial uncertainty. With economies of developing countries improving day by day, the demand for gold will remain high in future. It will ensure high price of gold for years to come.
Gold investing is the best safety net that you can build for protecting your future. It is an excellent way to reduce your risks of investing everything in one or only a few assets. Include gold in your investment portfolio to protect your financial well being in future.
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.