5 Benefits of Investing in Precious Metals

In the current state of the world’s affairs, nothing feels certain. With anxiety surrounding the fluctuating markets, stability of income, and changing prices on essential products, finding ways to ensure your financial future is critical. Luckily, self-directed IRAs allow you to hold onto and control your investments while growing your savings.

At times in which the future feels fragile, it is important to take stock of your assets. How will they be affected by changing market costs? Can they be easily transferred in the case of an emergency? In the long-term, will the investments in your retirement accounts grow enough savings?

Fortunately, a “golden” opportunity at the moment comes with purchasing precious metals in your self-directed IRA. Gold, silver, platinum, palladium, and the Precious Metals Composite (PMC) ounce can be held in your IRA, and the long-term benefits they can have on your retirement savings make it a valuable investment option.

After I started looking into precious metals, I learned that they are a store of wealth, and a great way to add diversification to an investment portfolio. Historically, wealthy people have always invested in gold. It is universally valued and hard to create more of it quickly, which is why investing in gold and other metals can benefit your retirement funds.

Check out five benefits investing in precious metals can have on your self-directed IRA, and see how they can hold up alongside your real estate investments:

Benefits of Investing in Gold and Other Precious Metals in Your IRA

1. Precious Metals are a great way to diversify your portfolio.

Many investment advisers recommend having at least 10-15% of your portfolio invested in gold. This also remains true for your IRA, as gold is a great way to diversify your portfolio. Here, you’re buying actual physical bullion bars and coins and not just buying into gold EFTs or mutual funds. Oftentimes, these gold bars and coins will be stored safely in approved depositories (some of which you can actually visit).

Note that the precious metals being referred to here must meet a fineness standard that is set by the IRS and must be held by an IRS-approved custodian. Jewelry, rare coins, and gems are all considered collectibles and are therefore prohibited transactions in your IRA.

In uncertain times, having a solid, tangible asset like gold secured in your IRA may be something to consider in order to have some peace of mind.

1. Precious metals are extremely liquid, divisible, and portable.

Unlike other investment types, precious metals can be easily liquidated. Metals like gold and silver are perhaps the only currency that can be universally traded in any market, at any time of day, anywhere in the world. Owning an asset that can be easily liquidated can come in handy, especially in case of an emergency.

When discussing the highly valuable characteristic of divisibility precious metals have, Chris Blasi of Neptune Global Holdings, LLC says, “Whereas a $500,000 piece of real estate must sell in its entirety, a $500,000 position in physical precious metals can be sold off incrementally to best suit an investor’s needs.”

Blasi also advocates for the portability of precious metals. “So, if economic, political, or cultural matters makes a specific location hostile toward investors, holders of precious metals can transfer them to a more accommodating location,” he says. “In these changing times a benefit like this cannot be discounted”.

Having this alternative asset in your self-directed IRA allows you to gain more control over your investments, giving you the management capabilities and flexibility that goes beyond paper assets.

1. There are lower costs associated with managing precious metals in your IRA.

Contrary to most other investments, gold and silver have lower carrying costs. Other than storage and insurance fees, owning precious metals in your IRA will save you the costs of property taxes, bills for upkeep and maintenance, administrative fees, and management fees for the assets.

While gold doesn’t accrue interest or pay dividends like other investments would, its hidden power is its ability to maintain and even increase in value over time, thus saving you more money for retirement in the long run.

1. Gold, silver, and other precious metals are consistently strong performers.

Not only are precious metals a unique way to further diversify your portfolio, but their high intrinsic value protects them from market devaluation. Over the past fifteen years, gold’s intrinsic value has increased by 315%, consistently outperforming all other assets in terms of levels of return. This includes stocks, bonds, and even real estate.

1. Precious metals are a safe and stable investment.

These precious metals can serve as a constant strategy for ensuring your store of wealth and creating a safety net from devaluation. Because these metals cannot be destroyed and have never been declared “worthless”, their value is intrinsic. It is a stable investment that maintains its wealth, which will balance out less stable investments during periods of market flux and prove to be helpful with regard to retirement planning.

Right now, many markets feel unstable. Prices are fluctuating due to a number of factors, and in your portfolio, isn’t it nice to know that you can hold onto something that will remain consistent, even in times of turbulence?

How do Precious Metals fare compared to Real Estate?

Now that we’ve explored the benefits of precious metals, let’s explore how real estate and precious metals investments can benefit each other.

Many investors turn to the reliability and accessibility of real estate, but may not necessarily be aware of the benefits adding gold and precious metals to the mix. On the flip side of things, gold bugs may be unaware of the various long-term benefits that real estate has to offer.

Luckily, these two options of investing are not mutually exclusive. Any properly constructed portfolio should have balance. Going “all in” on one asset type can be risky. Both precious metals and real estate excel in certain areas, and they both have categories in which they fall short, but by investing in both, these strengths and weaknesses can complement each other for a portfolio that is well-rounded and well-prepared for unforeseen circumstances surrounding your financial future.

While real estate can produce income due to rental payments, there are also insurance, and maintenance costs, which are higher than that of precious metals. Real estate investments are far more difficult to move than precious metals, as they cannot be easily liquidated, divided up, or transported quickly in the case of a financial emergency. You also run the risk of counterparty with real estate investments. This is not the case with precious metals.

There are some areas, however, where real estate shines brighter than gold. As I mentioned in my previous article, “5 Reasons Why Real Estate is the Most Popular Alternative Investment”, real estate offers you more versatility than any other investment type. Home, condo, and vacation rentals, fix & flips, mortgage lending, and commercial and raw land are all different options for real estate investing. The structure of your investments within an IRA can also vary within the world of real estate, including direct ownership, lending, funding, and shares in REITs. Each of these comes with its own form of risk and volatility. Precious metals offer options as well, but due to IRS restrictions, you’re far more limited in what can be invested through your IRA (often these metals must be pure, depository metals). With a plethora of real estate options you can choose to invest in with your IRA, you are given more room to express creativity with your investments.

Real estate also provides reliability. One of the biggest drawbacks I have seen happen a number of times to precious metals is how it can fall out of favor in times of low inflation and a strong economic environment. Conversely, real estate tends to boom in a strong economy.

There are ways your real estate deals can mirror the lower costs benefit that precious metals provides you with as well. For example, investing in raw land is a bit like gold in that taxes would be similar to depository fees. The difference is the greater level of freedom owning the land plot provides you as the investor. You have the ability to go into this land plot, build, and make changes to this investment, but metals a bar of solid gold isn’t as malleable.

The key takeaway from evaluating each of these asset classes’ strengths and pitfalls should be that when combined, they provide balance. For perhaps many of us, this is the first time in our lives that we have seen first-hand how quickly our country’s financial foundation can become uneven. That is why planning ahead for your retirement, regardless of which types of assets you decide are best for you, is always a beneficial, strategic move.

Have more questions about investing in real estate or precious metals in uncertain times? Comment below!