Should Precious Metals Be a Major Part of Your Retirement Plan?
Gold, silver, platinum, and other precious metals. To some, they represent the only kind of “real wealth” out there. To others, they represent a sketchy and unpredictable investment that should only comprise a small amount of your retirement portfolio.
Who’s right? Well, no matter where you are on the spectrum, it’s important to realize that gold, silver, and other precious metals are simply another investment type. That means they inherently contain some diversification value. But in a broader context, you should evaluate your overall retirement goals to better discern whether you should take advantage of your Self-Directed IRA to invest in these precious commodities.
In this article, we’ll look at how larger or smaller precious metal portfolios—and their different makeups—vary from investor to investor depending on how they value these metals, as well as their individual goals and dispositions. Then, we’ll try and figure out where you might fit.
Different Types of Precious Metal Investors
Although most investors agree that a well-diversified portfolio should include some amount of gold and silver, the question of just how large a portion this amount should constitute is a highly contentious one. Across the spectrum, you’ll find investors that will say all sorts of things about the precious metals.
- Conservative precious metal investors tend to look for just 0-4% of their portfolio in precious metals…sometimes, even less. They believe that the long-term annualized return of an investment on gold is where investors should look to gauge its true value…and they point out that the stock market tends to outperform it over time. If you’re thinking long-term, this might be a good strategy for you.
- Diversified investors might not necessarily place a high premium on the value of gold and silver, but they still recognize that diversification isn’t done through the stock market alone. They view gold and silver as emergency investments that they typically buy and keep over the long term. These investors might invest anywhere between 2-10% of their portfolio in precious metals.
- Aggressive precious metal investors believe that fiat currency is a problem, and investments in commodities are one of their personal solutions. A portfolio as high as 10-15% and beyond is typical for those “bullish” on precious metals—though it’s rare to see even the most aggressive investors go above this portion.
Where do you fall on the spectrum?
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Different Investment Types and Discerning the Purpose of Precious Metal Investments
There are two general types of investments when it comes to precious metals:
- Bullion: physical gold, silver, and more in the form of bars, jewelry, and coins.
- ETFs and stocks: Buying shares of a gold mining company or purchasing a gold-centered ETF are other ways of investing in commodities without owning physical gold.
Typically, a well-diversified investor will include both types of investments in order to give them their overall portfolio target for precious metals.
But what’s the idea behind all of this focus on these specific commodities? Aren’t there other types of commodities to pay attention to? Other strategies?
The value of gold and silver is that they tend to retain their worth even when financial circumstances send stocks plummeting. That’s not to say that gold and silver are perfect hedges against the market—but they are one way of ensuring that not all of your money is tied up in a single source.
Gold and silver, like many investments, tend to increase in dollar value over time, which is why they can be a key investment—and a key reason to use a Self-Directed IRA. Contact us at 1-866-7500-IRA(472) or read more at AmericanIRA.com to learn more about these accounts, which include the ability to invest in precious metals for retirement.
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