Were you aware that nearly 90% of retirement assets are invested in the financial markets? There’s nothing intrinsically wrong with that, but for those who have set up a self-directed IRA, there are numerous other opportunities with which to diversity. One of those is precious metals.
There’s a number of excellent reasons to consider precious metals. Those include:
- Diversification outside of equity markets
- Protection against inflation
- Protection against down markets
Protecting Your Assets
Precious metals are widely considered a stable investment. Generally speaking, they move in the opposite direction as the U.S. dollar and other assets that are dependent on its strength. For example, the greater the rate of inflation, the more relative value a precious metal will have against the U.S. dollar. Largely because they move in the opposite direction as the U.S. dollar and equity markets, they can be an excellent way to weather financial storms.
During the housing collapse that occurred in 2008, a number of Americans saw their investments take a sharp nosedive. Millions of dollars were lost across equity markets as the aftershock ripped through one sector after another. Folks became wary of making those kinds of investments. Precious metals became more attractive. Why? Because there’s much less volatility in precious metals than there was in equity markets at the time.
Today, the market has recovered and equity markets remain an attractive option. Nonetheless, bolstering your portfolio with a stable option like precious metals or land can help you weather future storms.
Protecting Against Inflation
There are currently widespread concerns about inflation. The president has recently commented that keeping the value of the dollar down will help protect American interests. On top of that, a rising national debt, skyrocketing food prices, low interest rates, and high energy bills have stoked fears concerning the value of the American dollar.
One of the major reasons why people invest in IRAs is to protect their money against inflation. One of the best ways to protect against inflation is to invest in a very stable asset. Two of the most stable assets are precious metals and land. Another strategy is to buy real estate in markets where costs are likely to rise against the devaluing of the dollar.
Restrictions on Precious Metal Investment for IRAs
The U.S. government places some restrictions on the quality of precious metals that an individual can invest in using their IRA. They are particularly fond of metals that are minted by governments. American Gold Eagle coins are the only type that is specifically approved for IRAs. This doesn’t mean that you can’t invest in other coins, but clearly, this can avoid certain issues with the IRS, since these coins in particular are meted out and measured by the U.S. Treasury.
The only other stipulation involves the purity of the metal. For any coin or bullion to be approved by the IRA it must have at least 99.5% purity.
Using your IRA to invest in precious metals is a great way for investors to weather financial storms. Precious metals provide stability against the U.S. dollar and stability during periods where equity markets are in freefall. Speaking with your financial advisor or IRA expert about bolstering your IRA with precious metals is highly recommended.