Precious Metal Investing Through Gold

Just as homeowners insure their homes against natural disasters or drivers insure their cars against damage, investors can use gold and other precious metals to protect their retirement savings from financial catastrophe. But just like any investment, there are risks to consider.

One pitfall is jumping into the market without sufficient research. It’s important to understand the gold market and how it works before investing in it. That includes knowing about the different ways to invest in it, such as buying physical bullion, gold-backed IRAs, mutual funds and ETFs. It also means understanding hidden costs, such as storage fees or transportation for physical gold and management fees for paper gold investments.

Another pitfall is not taking inflation into account. Investors should be aware that inflation will affect the price of their gold investment. In addition, they should be aware of geopolitical turmoil and currency crises, which can also affect the price of gold.

Gold has long been viewed as a store of value and a hedge against market uncertainty. But it can also lose its purchasing power if inflation rises. Inflation has risen in recent years due to the Federal Reserve’s Quantitative Easing program, and many believe it will continue rising as the national debt increases. That’s why some investors are shifting their assets into precious metals.

Those who choose to buy physical bullion often focus on the fact that it’s liquid and can easily be sold if needed. But there are other options for those who want to diversify their portfolio with a small allocation to precious metals, including buying shares in mining companies or funds that track the prices of specific metals.

Inexperienced investors are likely to be more susceptible to TV-marketed precious metal and coin providers, which have used a variety of tactics to target retirees, according to state regulators, lawyers and financial advisors. For example, many of these firms have targeted conservative media outlets to run advertisements that encourage people to move money out of their 401(k)s and IRAs into unregulated gold products. Those sales often involve high commissions and fees. Many of those investors are low-income retirees, which can make them especially vulnerable to being scammed.

Finally, it’s crucial to understand that gold doesn’t produce the same income as stocks or bonds. While it can appreciate in value, a person who invests in it will need to stay invested for the long term and monitor trends closely.

If you are considering adding a precious metals investment to your portfolio, speak with a fee-only financial advisor who can help determine strategies that align with your goals. These professionals don’t earn commissions from the securities, gold or other assets they sell, so you can be sure they are providing unbiased advice. If you have already decided to incorporate precious metals into your retirement portfolio, you should always seek the advice of a licensed financial professional who can help ensure that your gold investments are being held safely and securely.

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