O’Lover Hats produces finely crafted hats and radical head ornaments. With styles and trims that bend eras in time with the masculine and feminine, hat maker, owner Elwyn Crawford playfully calls them “agents of transformation”.
An individual retirement account (IRA) provides an individual with the ability to invest in a tax advantaged manner either through deferring the tax impact of gains into later years or through investing in tax advantaged ways. Unlike 401k plans, IRAs allow individuals to invest in a wide variety of funds or investment options. Some investors seek the stability provided by gold and seek to add gold to their portfolio, as well as the inflationary benefits of owning gold and the added diversification that it provides to your retirement assets. While you cannot use your IRA account to purchase gold coins that you deposit in a safe deposit box, there are alternative ways of investing in gold in your IRA account.
Common Stocks in Companies Dealing in Gold
Certain investors attempt to obtain exposure to gold by investing in mining companies that extract gold from the ground. These mining companies own mining rights or areas where there are both known and unknown gold reserves that are extracted by the mining company. When gold increases in value, the mining company earns more money that it distributes through dividends or the stock price appreciates, thereby providing the investor with exposure to gold. Despite the exposure to gold provided by a gold mining company, there are limitations associated with owning a gold mining company. The first is that these gold miners often mine other metals which may not be correlated with gold prices. Secondly, there are company specific risks such as the quality of company management or the quality of the mine that can also impact the stock price of the mining company. As such, situations may occur where gold appreciates in value but the gold mining stock decreases. This can work to your advantage however as quality management can outperform gold prices by having a lean and efficient operation. However, a benefit to owning a gold mining company is that they are easy to purchase in your IRA account and provide some exposure to gold.
A recently new financial innovation is an investment vehicle known as an electronically traded fund (ETF). ETFs act similar to mutual funds in some situations where an individual purchases a share in an ETF which then makes investments on behalf of the investor. ETFs typically have lower fees than mutual funds and are easy to purchase in an IRA. There are some that provide exposure to a variety of different investment classes including gold. One of the better ways to invest in gold through an gold ETF is by owning shares in an ETF that holds gold bullion. The ETF will effectively purchase gold bars and store them at warehouses, charging an investor a storage and management fee. If the value of the gold it holds increases, the gold ETF increases in value, thereby providing investors with a directly correlated gold investment.
There are many different ways that an investor can own gold through an IRA account including the purchase of a gold mining company or through ownership of an gold ETF that acquires and stores gold bullion. Convert your IRA to gold using one of these investment vehicles and benefit from the inflation hedge and added diversification gold provides to investors saving for retirement.