If there\u2019s one thing most investors agree on, it\u2019s that investing success can be measured by how much wealth they\u2019re able to amass. While disciplined saving and investing is one of the necessary requirements to build up your wealth, all the saving and investing in the world won\u2019t help you build up your assets if you\u2019re not investing in the right assets.<\/p>\n
Once you\u2019ve made your investment decisions, you\u2019ll want to keep on top of them to make sure that they continue to perform for you. As tempting as \u201cbuy and hold\u201d or \u201cset it and forget it\u201d can be, failing to keep track of your investments can cost you dearly in the long run. Periodic reassessments, and strategic investments in assets like gold that can both preserve and grow your wealth, can be key to investment success.<\/p>\n
Gold plays an important part in portfolio diversification and wealth protection<\/p>\n<\/li>\n
Gold protects investor assets against inflation<\/p>\n<\/li>\n
Physical gold investments are more advantageous than paper gold investments<\/p>\n<\/li>\n<\/ul>\n
When it comes to preserving wealth, there\u2019s perhaps no other asset investors trust more than gold. Gold has maintained its value and purchasing power over the centuries, while hundreds of countries, companies, and currencies have fallen by the wayside. That kind of resilience and permanence over the long term is attractive to investors, particularly those investing during times of great financial and economic uncertainty.<\/p>\n
Perhaps nothing has better demonstrated gold\u2019s ability to preserve wealth than its performance since President Nixon closed the gold window in 1971. At that time, gold was officially valued by the US government at $35, a price the government had attempted to fix through official intervention in gold markets. But once the gold window was closed and the last link between the dollar and gold was severed, the gold price<\/a> began to climb.<\/p>\n Gold has now broken the $2,000 barrier, and there\u2019s no telling how far it will continue to climb. The dollar, on the other hand, continues to lose its value. Today it takes $6.35 to purchase what $1 would have purchased in 1971.<\/p>\n The benefits of owning gold are many, but here are four of the most important ones.<\/p>\n Because gold mining is so resource intensive, additional production of gold adds only very little to total world gold supplies. This means that there is relatively little inflation of the gold supply, and thus gold can maintain its value and purchasing power over time. This stability was why the gold standard era was such a productive one for the world economy, and why investors today still look to gold to anchor their investment portfolios.<\/p>\n In a world in which value and wealth are skewed by fiat paper currencies, it can be difficult to assess what wealth really is, and whether one is actually gaining and accruing wealth. Nominal values increasingly make it seem like we\u2019re getting wealthier, but that\u2019s actually just because more money is being created out of thin air, leading to higher prices.<\/p>\n Contrast that with gold, which not only maintains its purchasing power over time but can even grow that purchasing power. Remember that it takes $6.35 today to buy what $1 purchased in 1971. By that measure of inflation, gold should be worth about $220 today. Yet it\u2019s actually worth nearly nine times that much. In fact, its annual rate of growth since 1971 has exceeded that of the Dow Jones Industrial Average and the S&P 500.<\/p>\n Portfolio diversification means not putting all of your eggs in one basket. When you invest, you want to invest in multiple asset classes, asset types, and geographic areas. That lowers the risk profile of your investments and ensures that in the event of a collapse in one sector of the economy, or in one country, you\u2019re not losing all of your money.<\/p>\n Gold can play a key role in diversifying your investment portfolio, as its risk profile is lower than stocks or bonds. Even the most fervent supporters of stock investing will often agree that gold should play a role in portfolio diversification.<\/p>\n American workers and retirees hold trillions of dollars of assets in retirement accounts such as 401(k)s and IRAs. While these accounts can do wonders in growing wealth during good times, they can be less than ideal during tough economic times. This is largely due to the fact that investment options through these accounts can be quite limited.<\/p>\n But more and more investors are beginning to realize that they can roll over their existing retirement account assets into new retirement accounts. Among the options they have is investing in a gold IRA<\/a>. By rolling over existing retirement savings into a gold IRA, you\u2019re maintaining the same tax advantages as your current retirement accounts, while gaining the ability to benefit from the protection that gold offers. A rollover from a 401(k), TSP, IRA, or similar account can be done with relative ease, and can go a long way toward protecting your retirement savings.<\/p>\n Investors have to face the reality that the future is one of inflation. With the Federal Reserve\u2019s recent move towards average inflation targeting<\/a>, the Fed will do everything it can to boost inflation. If you thought $3 trillion in money creation in a matter of weeks was crazy, just imagine what will happen when the Fed really gets going.<\/p>\n With so much money being created out of thin air, the US dollar will continue to weaken and devalue in the future, and it will be more important than ever for investors to protect themselves against that inflation. Many still remember when you could put money in a bank savings account and receive a decent amount of interest. But interest on savings accounts never exceeded inflation rates over the long term, making savings accounts a wealth-losing proposition.<\/p>\n While there are no guarantees that any asset will always make gains, when looking at the past 50 years of asset prices, gold is one of a handful that have consistently made real returns after adjusting for inflation. And with stock markets widely expected to flounder over the next decade, gold may be one of the best bets for investors looking to protect their assets against inflation in the coming years.<\/p>\n If you\u2019ve never invested in gold before, you may be asking yourself if it\u2019s worth it to invest in physical gold. After all, aren\u2019t there other ways to invest in gold? Yes, there are, but they have some significant drawbacks.<\/p>\n Exchange-traded funds (ETFs) have become a very popular investment trend in recent years, allowing investors to expose themselves to commodities, funds, or shares that they otherwise wouldn\u2019t have access to. ETF shares are traded on conventional exchanges, giving them a very liquid market and widespread availability.<\/p>\n Gold ETFs allow investors to purchase shares in funds that claim to own gold. Each share is not a share of gold or a claim to a certain amount of gold, but a share in the fund itself \u2013 and the problems with gold ETFs<\/a> are numerous.<\/p>\n First, you have to trust that the fund actually owns the gold it claims. With networks of custodial and sub-custodial relationships, where that gold is and whether or not it is encumbered in any way is nearly impossible for the average investor to ascertain. There\u2019s also the issue of potential share inflation, in which ETFs could create ever more shares in the fund without a corresponding increase in the amount of gold the fund owns.<\/p>\n Finally, because ETFs are a fund and traded on exchanges, they incur exchange listing fees, fund management fees, and more. Those fees can eat away significantly at any gains ETF shares may make.<\/p>\n Some investors like to buy the stocks of gold mining firms, thinking that as the price of gold increases, so too should the value of stocks in firms that mine gold. Warren Buffett seems to think that way, as his recent investment in gold mining stocks shows.<\/p>\n But mining firms bring their own problems to the table, such as corporate governance issues, labor disputes, the high energy cost of mining, and the cost of environmental remediation. Those all can negatively impact the stock price of mining companies, so that even if gold were to triple in price overnight, the value of mining stock shares could still sink.<\/p>\n There\u2019s also the fact that gold mining is resource intensive, and finding new mines isn\u2019t easy. So even with a skyrocketing gold price, there\u2019s no guarantee that mining companies will be able to mine more gold, or even make a profit.<\/p>\n That\u2019s not to say that stock in gold mining companies can\u2019t form part of a well-diversified investment portfolio. As part of your stock investments, mining company stock can certainly help diversify your assets and hedge your risk. But if you think that investing in mining stocks is just as good as investing in physical gold, you\u2019re going to be disappointed.<\/p>\n In the good old days, gold certificates backed by gold circulated as money. While those days are long gone, and gold certificates are no longer issued as currency, some firms today may offer certificates as a method of investing in gold, allowing investors to purchase gold certificates that are supposedly backed by gold. But those certificates aren\u2019t really anything more than a promise that there is gold somewhere backing them. Do you know for sure that the gold is actually there?<\/p>\n When selling such certificates, who can actually buy them, and where can you sell them? If they\u2019re not universally recognized on established markets, that means that they\u2019re not a liquid asset with a worldwide marketplace like physical gold coins and bars are. This means that you may be forced to sell them back to the issuer and that could cost you. Remember that when it comes to investing in gold, physical gold that you actually own will always trump paper gold.<\/p>\n The amount of gold in your portfolio depends on your level of comfort in exposing yourself to gold. Those who fail to understand the importance of gold to an investment portfolio may think that 5% of your portfolio invested in gold is sufficient, while others intent on protecting their investments against a stock market crash may think that 50% is better.<\/p>\n Whatever percentage you decide on, the key is that you want to make sure that your gold investment is helping you achieve your investment aims. That means periodically reassessing the performance of your gold assets and increasing or decreasing the percentage of your portfolio devoted to gold if needed.<\/p>\n If you want to invest in gold, there has never been a better time than right now. That\u2019s especially true if you\u2019re interested in doing a 401(k) to gold IRA rollover<\/a>. With stock prices still high, investors can cash out of their stock investments and cement the gains they\u2019ve been accruing over the past several years. And by rolling over their investments into gold, they can position themselves to take advantage of what could be a multi-year bull market for gold.<\/p>\n Many investors undoubtedly remember how gold performed during the last financial crisis, nearly tripling in price from its lows in 2008 to its record high in 2011. If gold performs similarly this time around, investors could make significant gains.<\/p>\n But those gains won\u2019t take place unless you make the decision to invest in gold today. You may think you have all the time in the world, but at some point stock markets will crash, and if you haven\u2019t protected your savings, you\u2019ll be scrambling to cut your losses and find gold to invest in.<\/p>\nBenefits of Owning Gold<\/h2>\n
1. Stability<\/h3>\n
2. Wealth Appreciation<\/h3>\n
3. Portfolio Diversification<\/h3>\n
4. Retirement Protection<\/h3>\n
Gold Performance Against Inflation<\/h2>\n
Physical Gold vs. Other Gold Investment Options<\/h2>\n
1. Gold ETFs<\/h3>\n
2. Gold Mining Stocks<\/h3>\n
3. Gold Certificates<\/h3>\n
How Much Gold Your Portfolio Should Have<\/h2>\n
What Is the Best Time to Invest in Gold?<\/h2>\n
Protect Your Investments With a Gold IRA<\/h2>\n