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Is Investing in Gold Worth it?

Dow Jones IA 14 year period of stock investing chart

I don't want to give you the impression that investing in gold is the holy grail of financial improvement or even retirement planning. Just like stocks and shares, the price of gold goes down as well as up, you can see that for yourself on the chart above. But what I do want to do is give you the facts as I have found them, with links to the information, so you can make up your own mind as to whether investing in gold, especially within a gold IRA, is a worthwhile investment or not.

It is well documented for the fact that it is true, that over the lifetime of the stock market, all the precious metals, including gold, have been outperformed by stocks. Having said that, this did change recently in a dramatic way. Precious metals have outperformed the Dow Jones on a rather impressive scale, since the start of the new millennium in 2000.

You will see in the chart taken from Yahoo Money (chart also available here) that shows there was a 63.16% change from the start of 2000 to the end of 2014. Or to put it another way, when the market opened on 1st January 2000 it opened at 11,700 and when it opened again on the 1st January 2015 it opened at 17851.04. What this means is if you had invested in the stock market at the start of 2000, by the 1st of January 2015 you would have received a return on your investment of 52.6%. I think you would agree that considering the low return we currently get from the banks, a return of 52% is very favorable.

However if you had been investing in gold, how did that perform over the same time period?

historic gold investment price chartThe chart to the side here, courtesy of Kitco.com, shows that gold was at the price of $283 an ounce at the start of the millennium and it opened at the start of 2015 at the price of $1206 an ounce. That is a return of 326% - a big difference from the 52% gained from the stock market over the same period.

So yes, people may tell you that historically stocks have outperformed gold, but as the evidence clearly shows, this has changed and the fact that it has happened over a 15 year period, and doesn't look like changing, then investing in gold may be worth looking at, if you haven't already.

So Why Invest in Something Like Gold?

From thousands of years ago, this metal has always been a big deal. I say it’s a big deal not only due to its worth but also because investing in gold has somehow always proved to be the best way to avoid inflation, in fact in a recent report assets report, it was shown that gold outperformed inflation over the past 40 years by a considerable margin. Furthermore, Individual retirement accounts have been brought down by inflation especially for investors whose main focus was traditionally on the stock market, real estate and private equity. But buying a precious metal for the diversification of your portfolio, to increase your financial status and wealth, or to improve your IRA account, will always prove to be worthwhile. Here’s why.investing in gold advice quotes

Click here to read why investing in gold is better than paper currencies

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Investing in A Gold IRA Rollover

When considering investing in gold, one area that is currently getting a lot of attention is investing in a gold IRA rollover. There are numerous other ways to invest in gold but also what is being seen is that more and more people look to hold their assets in IRA's ($ 6.5 trillion in 2013), with up to 4 percent of it being in non-traditional forms, such as gold.  Although a gold IRA operates in the same manner as a traditional IRA, the main difference, of course, is it holds physical gold bullion rather than paper assets. there are a number of factors that need to be taken into consideration when taking out a gold IRA rollover. For one, the best way is to use it for diversification and not put all your retirement eggs in one basket. You want to ensure you use the best custodian you can get to set up your gold retirement account for you, and that is why I have carried out extensive reviews of gold ira companies, for you so you can gain all the relevant information to help you when it comes to investing in gold.

The beauty of a gold ira rollover is that you don't need to take out another IRA, you can choose to rollover some or all of your current IRA into a gold IRA. Also, it doesn't matter if your IRA is traditional or Roth or if you have a 401(k), the ability to roll part or all of it is available to you. Whichever rollover specialist you talk to, they can advise you accordingly in relation to the best way to roll your existing plan into a gold funded plan.

What You Need To Know If Considering A Gold IRA Rollover retired couple looking at gold ira companies reviews on internet

Investing in a gold IRA rollover is growing in interest and the fact that you have landed on this page suggests that you are at least considering the option, maybe  you have not yet made up your mind. But why should you, at least, consider investing in a gold retirement account?

There are a number of various reasons why you should consider investing in gold, especially as an IRA investment, none more than the diversification of your investment / retirement portfolio.

With the price of oil currently falling and at a rapid rate, and the stock markets starting the year with a decline, a lot of people are showing concern with regards to their investment portfolios especially those connected to their retirement plans and this is one reason why they are looking to invest in alternatives. The gold market is a great way to increase your financial protection by diversifying your investments into something like a gold ira rollover.

In 1997, Congress passed the Taxpayer Relief Act which allowed investors to put away gold and other metals into a self-directed IRA. They were responding to investors who wanted to diversify their retirement portfolio from paper assets like cash, stocks, and bonds to add some tangible assets.

Edmund Moy, who is the leading Strategist for The Fortress Gold Group and was also the Director of the US Mint between 2006-2011, stated the following an article he wrote in September 2014: (click here for original source)

"By 2013, the total amount of assets held in all the Individual Retirement Account’s set up in the USA  totaled 6.5 trillion dollars, and out of that amount 2.5 – 4 percent were now in non-traditional forms, such as gold."

He went on to state:

And looking long-term, there are several risks that favor the continued growth in gold IRAs, such as the fragile global economic recovery, potential of aggressive inflation in the United States, growing concern of a major stock market correction and increased geopolitical risks.

When it comes to building a diversified investment portfolio, investing in alternatives from the normal investments, needs to be considered. The main reason being that diversification helps balance out the variances in values of other types of investment commodities. Sometimes an investor may be heavily invested in a particular type of investment such as stocks or ETF’s, but with a diversified portfolio, they may well have stocks from various sectors from the retail sector to the tech sector.

When one of these sectors, such as the oil sector, is going through a bad patch, as it is at the time of writing this, the chances are good that sectors such as retail or tech stock may be doing quite well. This not only balances out losses from the oil sector, but it can actually help to increase the value of a portfolio significantly over time.

Investors Want More Diversification

True effective diversification is not just diversifying stocks and ETF's, it is much more than that.  More and more investors are looking to broaden their horizons by investing in things like REIT's, corporate bonds, gold, and silver, as well as stocks and ETF's.

BullionVault, who are a leading peer-to-peer gold-and-silver-bullion exchange, based in London, recently produced their annual report and analysis on how varying assets have performed over the last 40 years (1976-2015) in both the UK and the USA.

As you can see from the facts below, although not the number one performing asset, gold has beaten other key assets in its returns over the past 40 years and has this century outperformed corporate bonds by a considerable margin.

ASSET PERFORMANCE LAST 40 YEARS
  • Gold’s 40-year change (+669% gross of costs) has beaten inflation (328%), housing (598%, excluding costs + yield) and cash (cumulative 535%).
  • Commodities have dropped below end-1975 levels (-3.05%);
  • REITs are the best-performing asset both since 1976 (9,177% cumulative on reported performance before costs) and also so far in the 21st century (up 484% since 1999);
  • Gold is the next best performer since 1999 (+340%) and then corporate bonds (160%);
  • Since 1976 gold rose in all 3 years when US stocks lost 10% or more, averaging 9.6% gains. It averaged 11.3% when REITs fell the same, rising on 3 of 5 occasions;
  • Cash interest rates have lagged inflation 16 times since 1975. Gold rose in all but 4 of those years, three of them 2013-2015;

 Why No Portfolio Should Ignore This Investment

When it comes to building a diversified investment portfolio, investing in a gold IRA rollover should seriously be considered. One of the reasons for diversification is that it helps balance out the variances in values of other types of investment commodities. As has already been mentioned, an investor may be heavily invested in stocks or ETF's, but a diversified portfolio will have stocks from various sectors from the retail sector to the tech sector.

With all this being said, many people want to know how much this type of investment should be in a diversified portfolio. In addition, they want to know, why buy gold?

How Much?

The first thing to understand is that adequate levels of gold investment in a diversified portfolio should be somewhere between 5% and 10% of the entire portfolio. Some investors argue more is better, but levels from 5% to 10% are the industry standard.

A Shelter Against Volatility

The answer to why an investor should purchase this kind of investment is multifaceted. The first reason to invest is because it can be used as a hedge of protection against market volatility and inflation. Market volatility can affect the value of gold, but it typically affects it much less than other types of investments. One of the reasons for this is that the value of stocks, bonds and ETF's are based on paper money and not in gold.

Protection from Inflation-Deflation

Inflation has always been a concern because inflation weakens the value of paper money. However, gold does not labor under the same constraints as paper money. It has a value that is established mainly through demand. Paper money can be weakened when there are shifts in power from one country to the next, or when there is some sort of political upheaval. In some cases, paper money can be rendered completely worthless, should the affairs of a particular country get bad enough. It is in these situations, gold benefits the investor.

Gold has had a remarkable performance during times of inflation and also deflation. Inflation is basically a period when the economy of a nation is struggling and the cost of living is high. During these times, gold prices tend to increase and that’s why it is often regarded as a ‘hedge against inflation’. Deflation, on the other hand, is when the economy is also struggling and business activity is quite slow. During deflation, it has been seen to perform well too. (check out my page on inflation and how it has impacted on us over the years)

Value

Another thing to consider is its value. While the value of gold did skyrocket some years back, reaching almost $2000 per ounce, it has since slipped to around $1200 per ounce (Current gold price can be found in the sidebar to the right). There is some discussion as to its value throughout the rest of 2016. Some experts are expecting gold to experience an explosion in value sending it closer to $2000 per ounce again. Other investors feel that while gold may not rise to this level, its values will steadily increase throughout 2016 and into 2017. Regardless, gold is at a good value and purchasing gold at current prices may be a wise investment as it is poised to increase in value, both in the short-term and the long-term.

The Various Options for Investing in Gold

Lastly, there are many different opportunities for an investor to purchase gold. It can come in the form of jewelry, collectible coins, legal tender numismatics as well as bullion. In addition, a gold investment can take the form of self-directed IRAs or gold backed investments, such as stocks in gold mining and refining companies. With coins being sold with as little as 1/10 of an ounce of gold, even an investor with limited capital can still invest.

It's not difficult to see why it has been a popular investment for professional investors for many years. It's also not hard to see why it still remains an extremely popular investment. If you're looking to diversify your investment portfolio, but you've yet to venture into this kind of investment before, you may want to consider it now. With all the upsides of investing in it, it's hard to ignore this valuable commodity.

CLICK HERE TO SEE MY GOLD IRA ROLLOVER COMPANIES REVIEWS

 

Who To Set Your Gold IRA Rollover Up With

If you are interested in having a gold IRA and want to know who is the best company to buy from I recommend Regal Assets. I provide a full explanation as to why it is them from research carried out, on my gold IRA companies page. The reasons why I recommend them are outlined in full on the page, however, if your mind is made up and you would like to speak with them directly, here is their information.

OR TELEPHONE: 1-855-628-9249