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Gold Investing Analysis
Many people have heard about IRA gold investing as a secure way to invest money for the future. However, not everyone is familiar with gold IRAs and their potential benefits. To provide an overview, a gold IRA is a type of IRA which allows investors to own physical gold instead of the more traditional paper-based assets like cash, bonds, and stocks. It was originally created in 1997.
Investing in gold does come with some conditions though. To qualify as gold that can be invested in an IRA, the precious bars or coins must meet the fineness standards set by the IRS and held by an IRA trustee instead of the IRA owner. The gold must also be stored in a depository that has been approved by the IRS. Depending on a person’s location or type of IRA, other rules may apply.
For those who have ever wondered why gold is an attractive investment, it appeals to investors whose goal is to have a diversified portfolio. Traditional IRAs are typically invested in stocks or mutual funds and are vulnerable to inflation. However, gold prices are usually opposite when it comes to paper assets so adding a gold IRA to a retirement portfolio provides insurance against inflation. As part of a balanced approach, gold IRA investments smooth out risk and are a smart choice for retirement investments.
Although there was not a demand for gold IRAs in the past, they have become significantly more popular since 2008. In order to invest in an IRA, a trustee and custodian for the IRA along with an approved depository have to be found. Since their popularity has grown though, many companies have simplified the transaction of investing in a gold IRA. And, of course, the impact of economics has increased the demand. Because of potential inflation due to the Federal Reserve’s stimulus programs, there is a sharp increase in risk and a continued interest in gold investing.
Finding a Reliable Broker
In order to put IRA funds into gold, each person has to establish a self-directed IRA. This is a type of IRA that the investor manages which can be invested in a wider range of products. For a gold IRA, the investor needs a broker to purchase the gold and then a custodian to create and administer the account. This is the company that will actually be responsible for storing and holding the gold. Most custodians are banks, credit unions, trust companies, or brokerage firms. Always choose one that has been approved by Federal agencies.
After finding a custodian, remember that they do not select dealers for their clients. However, many of the established custodians have formed relationships with metal dealers throughout the country and may be willing to share these lists with investors. There may also be a possibility to work the other way. Some metal dealers can recommend an IRA custodian. While these options may be easier, investors can and should make a wise choice for both.
Criteria for Gold IRA Companies
When choosing a company, there are a few basic criteria to look for. Not surprisingly, the first of these would have to be transparency. Ensure that the company provides a listing of all the costs up front to avoid any hidden fees made after the investment is made. Secondly, look at the company’s track record. The Better Business Bureau is a third party that can be used to track the history of a company and their business practices. It’s well worth looking into an objective third party’s opinion.
Thirdly, look at the company’s flexibility. Each investor has different needs and goals, so choose a company that personalizes their services to each client. Avoid any company which appears to have only a one-size approach. Fourthly and finally, look at the qualifications of a potential company. Only deal with companies which have all of the appropriate licenses, bonds, and insurance to protect investments. Always ask for verification of these licenses and any other information before choosing a company.
The bottom line is that gold IRAs are often seen as alternative investments, but it does provide a valuable investment when building a diversified portfolio. Anyone interested in their retirement package should consult with their financial advisor to determine how gold can fit into the overall goals of a portfolio.