What does a “complete” retirement portfolio look like? Unfortunately, there is no one answer that fits everybody. But for those who are interested in building a stable portfolio of a wide array of investments, the Self-Directed Precious Metals IRA holds special interest. In this kind of arrangement, an investor holds precious metals within a Self-Directed IRA. And because precious metals tend to hold on to their value over time, this gives the retirement investor some confidence that when they need their retirement funds—no matter what’s happening in the stock market—some of that money will be there.
But why do people trust precious metals so much, and what does it mean for a retirement portfolio? Let us explore in greater detail.
How Does a Self-Directed Precious Metals IRA Help Ensure a Broader Portfolio?
To answer this question, we have to define what it means to have a “broad” portfolio. While it might seem that the width of a portfolio may refer to the amount of money in said portfolio, it can often serve as a colloquial term for the diversification present within a portfolio. For example, owning $1,000,000 in one stock would be a “tall” portfolio, but it would not have the broad range of assets required by a well-diversified portfolio.
In that sense, precious metals accomplish something right off the bat: they allow retirement investors to use an alternative asset class that does not necessarily correlate with what’s going on in the stock market. For instance, if there was a recession starting tomorrow—and the stock market tanked with the greater economy—an investor could still have confidence that their precious metals might not correlate with these elements. In some cases, precious metals might even increase while the stock market decreases.
How Does One Use a Self-Directed Precious Metals IRA to Construct a Broader Portfolio?
That leads us to the next question: how is it done?
It is possible to simply purchase gold and silver and store them yourself. Voila—you now have a different portfolio. However, we are talking about using the benefits of a retirement portfolio, in which you will have specific tax benefits to storing wealth in these accounts. In the case of using a Self-Directed IRA, you can invest in non-traditional retirement assets like real estate and precious metals. But because there are tax protections, you will also want to pay attention to the rules that govern holding precious metals in a Self-Directed IRA.
In the case of a Self-Directed IRA, you would not store the precious metals in your own home, as they would not be considered your personal investments. They are held by the IRA, which means you will have to store these precious metals in an approved, insured depository. This in turn gives you greater security when storing the precious metals that constitute part of your retirement portfolio.
Incorporating Precious Metals into a Retirement Plan
There is no specific rulebook that says you have to buy X amount of gold and Y amount of silver to have a perfectly balanced portfolio. But one thing is clear: holding precious metals within a retirement portfolio can provide the kind of safety and security you will not feel when you own just one type of asset. That extra security is essential to people who are building a long-term portfolio that they want to last the test of time—and potential economic turbulence.