The stock market made great gains over the last several years. This year alone, we’ve seen the Dow Jones Industrial Average and the S&P 500 break multiple records. Even so, if you have a traditional IRA or 401k, your retirement funds could be at risk. In fact, if you read between the lines, there is plenty of evidence to at least suggest that there is major danger ahead for the stock market.
Thankfully, there are ways to protect yourself. One way is by diversifying your portfolio with a gold backed IRA.
What Is a Gold Backed IRA?
A gold backed IRA is a retirement investment that works much like a traditional IRA. In reality, there is one essential difference: With a gold backed IRA, you’re investing in gold, rather than the stock market. Therefore, your gold backed IRA will realize gains whenever the price of gold increases and losses when the price of gold decreases.
How a Gold Backed IRA Can Help Protect Your Retirement
There are several red flags that investors are beginning to notice. Between the fall of oil prices, the poor economic conditions in the Eurozone, and poor geopolitical conditions around the work; many investors feel as though we’re looking a market correction — or worse — dead in the eyes. The good news is: gold can help protect you from losses. Here’s how it works:
When investors start to get concerned with their ability to realize gains in the stock market, a sell-off typically ensues. That means that thousands of investors start to sell billions of dollars worth of stocks that they own. As a result, a market correction — defined as a period of time where the stock market value drops by 10% or more — takes place. In these cases, traditional retirement investments that are backed by stocks would take substantial losses.
However, when investors pull out of the stock market, many of them look for another type of investment that they believe will work well for them. The industry calls these investments “safe havens.” One of the most common safe haven investments is gold. So, as market values fall, demand for gold has a tendency to increase. As more and more investors start to purchase gold, the supply of the precious metal starts to decrease.
Following these trends, the basic law of supply and demand tells us that the price of gold will eventually increase.
In theory, while you may take losses in the stock market, you should also realize gains on investors’ flight to safety into gold because you’ve got a gold backed IRA. As a result, your losses would be tempered by the gains, assuming you were properly diversified.
Geopolitical conditions, economic conditions, and market conditions around the world suggest more turbulence ahead in the markets. The good news is a market correction doesn’t guarantee you have to be a victim. By protecting your investments with gold, you can minimize — or possibly even eliminate — your chances of losing a big chunk of your retirement funds.
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