Gold has been used as money and as a store of value throughout history, and it’s still seen as the most reliable safe haven investment that you can make today.
But where should you buy gold to keep in your IRA? And how much should you keep there? To find out, take these simple steps to make the best investment in gold for your IRA.
Asset Allocation
The most important rule for any portfolio is that you should never put all your eggs in one basket. Diversification will help minimize your risk exposure and reduce your potential losses. A sensible investor should aim for about a third of their investments being made up of stocks, bonds, and cash equivalents (like CD's), with another third allocated to real estate
investment properties, gold, or other commodity assets like oil. The final third should be invested in something a little more speculative like rare coins or fine art.
Government and Private Bonds
The United States government has four bond types: Treasury bills, Treasury notes, Treasury bonds, and savings bonds. The federal government provides safety as an investor has a guaranteed return of principal that cannot be lost due to an unfavorable change in interest rates.
Private corporate bonds also offer a risk-free investment opportunity with predictable returns. While historically they have been issued by blue chip companies like IBM or General Electric, as recently as 2007 leveraged financial companies such as Bear Stearns also offered this type of investment opportunity.
Stocks
If you’re looking for a secure investment that has shown its resiliency, then investing in gold might be your best bet. Gold is historically seen as a stable investment and some say it can do well during turbulent financial times, like now.
However, make sure you know your risk tolerance before investing any of your hard-earned money into gold stocks because this industry may not be for everyone.
Growth-Oriented Mutual Funds
Many people think of the stock market as uncertain, but it's not any more uncertain than any other part of investing. By diversifying your portfolio and including some stocks, you can increase your risk tolerance.
Additionally, by investing in mutual funds that have a long-term strategy and history of outperforming the average index fund over time, you can avoid being invested in stocks during periods where they are on a downturn.
Exchange Traded Funds (ETFs)
There are two main types of exchange traded funds: index funds and ETFs. An index ETF is an investment vehicle that uses an index as its benchmark or exposure.
In this way, it acts much like a mutual fund does. Unlike mutual funds, ETFs trade on the open market and can be bought and sold throughout the day just like stocks.
Individual Stocks and Bonds
While you are able to invest your IRA account into individual stocks and bonds, there are many other options that can be more beneficial.
The 401(k) is a much better option because it provides a less volatile investment than stocks or bonds.
A 401(k) also has much higher liquidity than an IRA which gives you the ability to access your funds at any time.
Real Estate Investments Trusts (REITs)
REITs are a type of investment vehicle that allows investors to diversify their portfolios, though many REITs specialize in either residential or commercial properties.
REITs provide diversification benefits because they usually hold many assets and spread the risk over multiple sectors of the economy. As with any stock or security, there are risks associated with owning a
REIT, but you can reduce these risks by doing your research and balancing your portfolio wisely.
Commodities (Gold, Silver, etc.)
Gold can be a really good choice as an investment. It has consistently been one of the best performing commodities and is known so much because it is scarce.
Most people don't realize that gold can also act as a hedge against inflation which could happen at any time.
Retirement Savings Options
As you plan for retirement, you may have several different options on how to go about this. One of these is a self-directed IRA which can invest in a number of different ways, including gold.
While there are various reasons why one may invest in gold with their self-directed IRA, there are also certain disadvantages which need to be considered before making any investment decisions.
The key is to weigh your options and make an informed decision that is best suited for your individual needs and goals.