What’s in Your Retirement Portfolio?
Is it made up of the usual stuff––stocks, bonds, mutual funds, annuities and the like? Have you invested in a broad range of stock classes so as to be diversified? Maybe you’ve also been hearing about the virtues of gold, how gold is protection and insurance against inflation and currency debasement, as well as global uncertainty. But you’re not sure how to invest. You’ve probably heard that many money managers advocate for investing anywhere from 3%–10% of your portfolio into gold––the more bullish will recommend an allocation as high as 20%. But with the many investment options, you’re wondering what are the best options for you for investing in gold for you. Not all options are created equal and you may’ve heard that there are many ways for the investor to lose money with gold.
Let’s look at options to invest in gold and the risks associated with each.
Besides having all the downsides of any other stock, gold miners tend to be risky because they trade with the broader equity market. Then there’s the question of their management inventory––is the company supported by maintaining consistent gold production or is it only buoyed up through buying smaller-cap companies?
The problem with buying small gold miners is that they have all the problems of any other start-up: They are in the exploration phase and have no cash flow. It’s been said that picking among these stocks is like buying a lottery ticket because very few companies actually strike gold and become profitable. Even fewer become takeover targets.
Like mining stocks, Exchange-traded Funds also do not give you physical possession of your gold and provide no real physical security.
While Gold ETFs are made up of contracts and derivatives, and are redeemable for cash, at no time do you actually own any physical gold.
When ETFs have low trading volumes, the advantage of purchasing an ETF over a futures contract or equity diminishes. The bid-ask spread can be too wide to be cost-effective.
Because of the nature of ETFs, they may be better suited for the more aggressive and risk-averse short term trader.
Instead of being an independent pool of securities, an Exchange-traded Note is a bond issued by a financial institution. The company promises to pay the holder the return on some index over a certain period of time and return the principal of the investment at maturity. But, if something happens to that company––such as bankruptcy––and it’s unable to make good on its promise to pay, the ETN holder could be left with a worthless investment.
You may’ve seen the commercials or magazine ads or home shopping shows hyping these coins, sets, and collections. They’ll dress up their pitch with mintage figures to make the coins seem rare, tout the age of the coins (like it matters most), their alleged value, and punctuate it with the high pressure of “Hurry Now Before the Deal Ends!”
The truth is, the coins they are selling are not investment grade and are basically worthless as anything but souvenirs.
Take for example the gold–clad coin being sold as a “Gold Tribute Buffalo.” This is a 9mm, “24 KT” coin. Pay close attention to the 9 mm because this means the coins are only clad in a thin layer of gold. Unlike the solid gold coins produced by government mints, these private mint coins, such as the tribute Buffalo, only consist of 14 milligrams of gold! Consider this: 14 milligrams at today’s current spot price is little more than 50 cents worth of gold! The coin is clad in a centimeter’s layer of gold, underneath the coin is stamped from a much cheaper metal.
In other words: Read the fine print. These coins are a rip-off!
“The United States Mint has never produced or sold gold or silver-plated coins.” This is an exact quote from the United States Mint website.
Neither do other government mints. When you purchase coins like the American Buffalo or American Eagle, or even the Chinese Panda, Canadian Maple Leaf, or the Austrian Philharmonic, you are guaranteed a coin of proper quality and fineness to be worthy of an investment grade bullion coin. All the coins we sell at RC Bullion meet the standards of fineness to be eligible for holding in a Self-directed IRA.
For the large scale investor, gold bars are a simple and efficient way to invest in gold. Larger bars are not as flexible when it comes to selling. For example, if the owner wants to sell 100 grams of a kilo bar, it’s not easy to slice off one end of the bar. The choice of buyer is also more restricted as the seller will need to find a larger dealer. It is also more unlikely that a private buyer will be found as most people are not familiar with gold bullion bars.
Gold investment coins, on the other hand, are available at very competitive prices compared with similar size bars. Because gold coins are almost universally recognized, they are also very easy to resell.
Whether you choose direct delivery or rollover or transfer a portion or all of an IRA into gold, you are protecting your retirement from the highly fluctuating stock market and other volatile investments. But before you do anything with your money make sure to do your homework and get the best information available. You can begin by downloading a FREE mini-course that will help answer many of your questions about gold IRA rules, gold investing and coins. Full of important money saving investment tips, this guide has helped teach many of our clients to invest like experts. If you ‘d like to save precious time and possibly thousands of dollars, you need to read this today!
An investment portfolio that isn’t diversified could be leaving your retirement in danger. The clock on your money is ticking. Don’t wait to protect your assets.