When people say that they’re diversifying their assets, they don’t go into details. But some people—and these people are often known as “goldbugs”—are all too happy to tell you about their strategy: they use a Self Directed IRA to purchase gold or silver.
If you’re unfamiliar with the process, let’s take a look at investing in precious metals and see what it really means to diversify with a Self Directed IRA:
Self Directed IRA: Meet the Precious Metals
If you want to know your precious metals, you’re first going to have to learn exactly what they are. And that means knowing the individual metals themselves. Here are a few quick things you can learn about these precious metals and what separates them from each other:
- Gold: Gold is renowned throughout history as one of the most common forms of money. There’s a reason for that. Gold is malleable, which means it can be separated and shaped easily, but it’s also resistant to rust, which means that it doesn’t lose its value over time. Gold is expensive these days, often over 4 digits per “troy ounce,” and generally easy to store because of this high value-to-weigh ratio.
- Silver: Silver is immensely valuable as well, though compared to gold, it’s an inexpensive option. With current silver prices at some $14 per troy ounce, silver can be a bit of a “beginner investment” for anyone looking to hold a substantial amount of physical precious metal bullion. Silver is highly durable like gold and even has uses in medication and healing thanks to its antibacterial properties. Perhaps that’s why silverware is so popular.
Other metals include platinum and palladium, though gold and silver are traditionally the main investments that “goldbugs” seek out in order to diversify their portfolio.
Precious Metal Diversification: How Does It Work?
Perhaps you’ve read about “hedging against inflation” with gold and silver and you’re not sure how that process works. The truth is, hedging against inflation isn’t as simple as buying gold and silver and calling it a day; many of the numbers do not support a direct relationship between inflation and the value of gold.
When it comes to investing in precious metal bullion, you’ll want to think of gold and silver as a physical holding of monetary value. It’s like moving your dollars out of the dollar and into a tangible investment that you can hold. Sure, you can hope that the value of your gold and silver will go up against the dollar so that you can sell your investments for more than you paid, but for many people, the inherent value of gold and silver is that they are a different type of value in your portfolio—a value that stands very little chance of degrading over time because of the quality of these metals themselves.
Many goldbugs like to point out that you can take your gold and silver, get in a time machine, and still have wealth with you because gold and silver have been so consistently valued over the years. That’s one reason why many people think gold and silver are a great way to hold value even at points of economic crisis. It’s no guarantee of short-term results, but many goldbugs tend to think long-term when it comes to these investments.
If you want more information about precious metal investing through a Self Directed IRA, be sure to visit our section on precious metals. You can also call us at 828-257-4949 to learn more about what it means to invest through a Self Directed IRA.