Learn how to protect your retirement savings.
3 Essential Tips for Success When Investing in Gold
Are you ready to start investing in gold? Here are 3 essential tips for beginners
You’re here because you’re interested in finding the best way to invest in gold to diversify your portfolio and hedge against inflation and financial crises. There’s just one problem. You aren’t sure how to invest in gold, or you’re a beginner to investing in general. So, the first thing you need is guidance.
Sure, there are many gold investment companies out there, including some that can set you up with a precious metals IRA; however, there’s more to gold investing than figuring out who to invest with.
Learn how to secure your financial future with gold by following these three essential tips we put together for you.
1. Learn the different ways to invest in gold
You’ve probably been told to do your research on investing in gold before, and chances are you even read a few blogs or watched a YouTube video or two on how to invest in gold. But now, it’s time to go a little deeper.
We often hear questions like, “Is it safe to invest in gold?” or “Is gold a good investment?”
The answers to these questions aren’t as simple as yes and no. There are several ways to invest in gold, and each of these avenues comes with its own levels of security and risks.
Here are just a few ways to invest in gold and how to keep those investments secure.
Invest in gold jewelry
Investing in jewelry is one way people go about investing in gold. Some are attracted to the fact that they can wear their investments. However, this is the method of investing in gold that comes with the highest risks.
Ultimately, the risks of investing in gold jewelry are exactly what you can imagine. Wearing your investment can lead to theft and loss. Additionally, if you don’t know a reputable jeweler, you may experience issues down the road when you try to cash in on your gold jewelry investment.
For gold jewelry, the biggest issue is the premium you pay when you buy the jewelry, as it’s sold as a work of art, compared to the value you get when you sell it as it’s bought by the jeweler as scrap metal.
When it comes down to it, you’ll find that this option is better suited for a night out on the town than securing your retirement portfolio — besides, it’s better to lend your grandkids your jewelry for prom WITHOUT worrying about what’s going to happen to your life savings.
Invest in collectible gold coins (“Numismatics”)
If you love collectibles, your attention may be drawn to collectible gold coins. However, there is more to purchasing collectible gold coins than, say, collecting in vintage toys or stamps. While gold coins have a place in the financial world, the risks of investing in collectible gold coins can often outweigh the rewards.
When you choose to invest in collectible coins, you are dealing with a different collectible market, and you have to know that market like the back of your hand because collectible coin prices don’t necessarily move with the price of the gold market. They tend to move over long stretches of time (and we’re talking DECADES here), and knowing what will be in demand is not easy — even for the most skilled collectors.
Ultimately, many will state that collectible gold coins are difficult to even call an investment, because their value is determined more by the collectibles market than the gold market. You have to buy the right coins and then wait decades to see your return when you sell.
Luckily, there are better ways to invest, and it’s easier to understand your return with other investments.
Roll a portion of your retirement funds into a Gold IRA
One of the safest ways to invest in gold is to roll a portion of your standard IRA into a Gold IRA. A Gold IRA functions very much like a standard IRA, except with one important difference: Your investment is in physical, tangible gold that doesn’t rely on the health of the stock and bonds market, Wall Street, or any other third party.
With a Gold IRA, the gold is completely yours with no debt attached to it. Just like if you paid off your home, when you purchase gold, it belongs to you.
Keep in mind, this is not like buying a gold ETF or a mining stock where you don’t own gold. With ETFs and mining stocks, you own shares in a company that has gold or is tied to the gold market. While in many cases those shares will go up when the price of gold goes up, you are still at risk of the company not performing well due to bad management. It is very much like renting a home versus owning it: renting your home (gold stocks) or buying your home (owning physical gold directly). At the same time, when you have a Gold IRA, your own gold is in an IRA, so you can enjoy all the tax benefits that come with a typical IRA, in addition to some unique benefits available only for Gold IRAs.
You can roll over a portion of your retirement account into a Gold IRA as either a Traditional IRA or a Roth IRA (depending on what your original account is). We wrote an article explaining the different types of Gold IRAs here.
However, while the benefits of a Gold IRA are very attractive, never put all your eggs in one basket. We don’t recommend allocating 100% of your portfolio in gold, silver, stocks, bonds, or real estate.
So, if you shouldn’t put everything into it, how much should you invest in gold?
2. How much gold is enough?
Any responsible advisor should tell you that you shouldn’t put all of your eggs in one basket, and your nest egg should be split up into different investment opportunities, in different asset classes and markets for best performance.
Consider the image below. It shows the average performance of IRAs from 2000 to 2020 with and without gold.
In the last two decades, gold outperformed the markets, so if you had a higher percentage of gold in your portfolio, you would have done better. This coincides with the money printing done by our Federal Reserve. In a world where the value of the dollar is diluted by money printing and government stimulus, the gold price thrives.
But how much should you invest?
Remember that gold should only be used as a tool to hedge against inflation, financial crisis and stock market collapse, so you need some, but how much? Ultimately, the amount you should invest in gold depends on your strategy. If you look at the 2008 crisis and other crises like it, a position of 25% gold would have offset the market losses you took between 2008 and 2009. A potential larger crisis will require a bit more. That’s why we recommend to people that contact us to place up to 30% of their portfolio as a way to protect their portfolio from crises like the ones we’ve seen in recent history.
Having a consultation with a reputable gold dealer can help you create a strategy that sets you up for a more secure financial future. But how do you find one?
3. Find a reputable gold dealer
In order to find a reputable gold dealer, you have to ask the right questions. The absolute first question you should ask a dealer trying to get you to invest in gold is, “What portion of my portfolio should I put into gold?”
If anyone (and we mean anyone) tries to tell you to put ALL of your money into gold, walk away. It is my firm opinion that you should walk away from anyone who tells you to put more than 30% of your life savings into any one asset class.
Any credible company will make sure that you invest enough of your wealth in gold to protect and diversify your portfolio, but not all or even most of your wealth.
Think of gold as a hedge, or a financial insurance policy. You need enough of it for better performance for your portfolio, but any investment more than 50% into gold is equivalent to you betting on gold. And while gold has, at our current financial climate, much better odds than roulette, it’s still a bet nonetheless.
Now, if you believe in gold more than any other asset, then you may take that bet, but that is not a recommendation you should hear from a credible dealer. That’s not diversification, and a reputable company will explain the risks involved in investing anything more than 30%.
Another important issue to look into is their track record. You should always look up reviews of a Gold and Silver IRA company that you’re interested in.
Think about it. If Ron from accounting approached you and said he came into large sums of gold and wanted to sell you some, you’d probably look at him funny. Sure you might know Ron as a killer softball player for the company team, but how much does he know about gold? There are no reviews online that can tell you how Ron works with gold, how he has handled past clients that tried to sell it back to him, and he doesn’t have a lot of clients. Ron has no experience, and you have no third-party reviews to give you a sense of how he works.
On the other hand, if you find a gold dealer who has hundreds of stellar reviews, you know that they’re doing something right.
Reviews are given by people who have dealt with this company before, and they tell you everything you need to know. Make sure to look at the original review portals where these reviews are left. There are several reputable third-party portals, like BBB or Google Business. Don’t rely on what you see on the dealer’s website.
Once you are satisfied, you can schedule a consultation to ask them more specific questions.
Here are a few questions you should ask during your consultation:
- Why do people invest in gold?
- Is gold a better investment than silver? (there is no right answer, so see if they are leading you to a definite answer)
- Do you (the dealer) invest in your own products?
- What types of gold do you recommend and offer?
- What are your recommendations for storing my gold?
- How do I insure my gold?
- How do I sell my gold?
A reputable and credible company should be able to answer these questions without missing a beat.
And once you find a reputable company that you’re comfortable with, it’s time to plan your investment.
When should you start investing in gold?
There’s no time like the present. You don’t want to wait to buy gold because no one knows what the future will hold or when the next crisis will hit. And nobody can react fast enough to crises.
Stock market crashes are bound to happen. Today, the stock market is more overvalued than ever before, and when it crashes, it will be devastating for portfolios that consist mostly of stocks. During times like these, gold typically skyrockets as investors run for safety.
If you’re planning on playing the long game with gold, invest as early as possible.
Are you ready to start investing in gold? Contact us today for a free consultation to learn more.