New to Gold? Don’t Trust It? 4 Things You Need to Know
This year has seen an explosion in interest in gold, as investors of all types are rushing to invest in gold in order to protect their investments. Some of those investors are people who were badly burned by the stock market crash of 2008, and who have vowed not to allow their portfolios to suffer the same types of losses again. Others are younger investors who realize that stock markets are artificially inflated, and who want to protect their assets against the possibility of loss.
But many of these investors may be first time investors in precious metals, and the market for gold may not be familiar to them. They may have serious trepidation about putting a significant portion of their retirement savings into a gold investment, and may wonder whether investing in gold is really such a good idea. Some of the questions they may have include, how do I know that my investment is safe? What kind of gold should I buy? What are the tax implications of investing in gold? How will gold perform vs. stocks?
If you find yourself asking some of those questions, you’re probably looking for answers. You may be hesitant to put your hard-earned savings into an asset that you may not have much familiarity with, and that’s okay. Trust has to be earned. So if you’re on the fence about gold and wondering whether it’s really such a great investment, here are four of the most important things you need to know.
1. How Do I Know That My Gold Is Safe?
Safe storage of gold is probably one of the chief concerns of every new gold investor. You don’t often wonder about the safety of your bank account or of the stocks and bonds in your retirement account, because most of those assets are held electronically. There are no physical dollars, stock certificates, or bonds to steal.
Gold is different, and as a physical asset it has to be stored and protected. There are numerous options for that, depending on how secure you want your gold to be.
Storing your gold at home can be fine for small amounts of gold, but it’s at high risk of theft. And if you’re looking to invest $25,000 or more of your assets into gold, the last thing you want to do is leave that amount of gold at home unsecured and uninsured.
That’s why many other investment options exist to keep your gold investment safe and secure, like a gold IRA. A gold IRA requires, like any other IRA, that your assets be held by a custodian. In most cases, custodians work with a precious metals depository to store and secure your gold. That means that when you’re investing through a gold IRA, your gold coins and bars are stored with some of the most experienced and trusted depositories in the business, all but ensuring that your assets will not be subject to theft.
2. What Are the Tax Implications of Buying Gold?
Before investing in gold, you’ll want to consult with your tax advisor to gain clarity about the tax consequences of any investment you make. But in general, there’s a difference between investing in gold through a gold IRA and investing in gold outside of an IRA.
Outside of an IRA, gold is considered a collectible and is taxed at a collectible tax rate. Gold held in an IRA is taxed at marginal income tax rates when you decide to take a distribution. Since many retirees take distributions at a time when their marginal tax rates are low, and they’ve used pre-tax dollars to invest in gold rather than using post-tax dollars to invest in gold outside of an IRA, they can come out ahead in the long run by investing through a gold IRA.
If you have existing retirement assets in a 401(k), 403(b), 457, TSP, IRA, or similar tax-advantaged retirement account, you can roll over assets from those accounts into a gold IRA. That allows you to keep your assets in a tax-advantaged retirement account, avoid costly taxes and penalties, and continue accruing investment gains until you decide to take a distribution.
3. How Will Gold Perform vs. Stocks?
Many people assume that stocks will always be the best investment for building wealth over the long term. But that isn’t always the case. Over the past 20 years, for instance, gold has averaged annualized gains of 10.4%, versus 5.1% for the Dow Jones Industrial Average and 5.0% for the S&P 500.
If you knew that there were an asset that would more than double the performance of stocks, wouldn’t you want to invest in it? There’s probably not an investor who wouldn’t. But hindsight is 20/20, and many investors 20 years ago didn’t have gold on their radar screen, to their detriment.
Of course, past performance is no guarantee of future performance. But think about the direction the economy and stock markets are taking. From 1982 to 2000, stock markets saw their most explosive growth ever. That’s why investors in 2001 remained confident in stocks. But between 2001 and 2020 we have seen two major stock market crashes, several major recent corrections, and we’re possibly on the cusp of a third major crash.
Given the state of the economy today, the size of the national debt, and the amount of monetary easing the Federal Reserve has engaged in, do you expect the performance of stock markets to look more like the bull market of the ‘80s and ‘90s, or the up and down market of the last 20 years? If the latter, then maybe gold will be the better bet for you.
4. What Kind of Gold Should I Buy?
The type of gold you buy will be determined by your finances as well as your investment vehicle. If you’re investing through a gold IRA, for instance, only certain gold coins and bars are eligible for investment, as they need to comply with minimum standards for metal content. While that narrows the field somewhat, there are still numerous options out there, with coins and bars in all different sizes and designs.
That’s where it can help to talk to experts like the ones at Goldco, who can help explain to you all the different options available to you. Whether you want to invest in exclusive gold coins, buy gold bars, or hold a mix of the two, Goldco’s representatives can help you choose the best assets for your investment portfolio.
Don’t Wait to Invest in Gold
With gold having gained nearly 25% this year already, and poised to break out even further as the economy still shows signs of weakness, it doesn’t pay to wait. Uncertainty surrounding the economy, uncertainty about gold supply as mints have to deal with COVID among their workforces, and fear about the future could combine to drive the gold price back toward its record high by next year, and possibly beyond.
If you haven’t already protected your retirement savings with gold, can you afford to wait? Don’t leave your assets subject to stock market crashes and financial crises a minute longer than you have to. Call Goldco today to find out how you can benefit from investing in gold.