In this post by MSN, the case for investing in precious metals, rather than the more typical options, is outlined.
They begin by describing the pessimism of the stock markets, and state that many are looking to precious metals as a more attractive alternative as compared to individual retirement.
Stating that coins are 99.9% pure or better, and as such coins of particular interest are the American Gold Eagle coins, Canadian Gold Maple Leaf coins, American Silver Eagle coins, American Platinum Eagle coins and bars (bullion).
MSN points out that South African Krugerrand, and bullion that is not sufficiently pure, are to be avoided, and that any investment in coins or bullion has to be kept by an IRA trustee, rather than the owner.
However the article then goes on to state that it is often difficult to find a trustee that is willing to set up this type of investment, as the associated tasks necessary are relatively complex and time consuming.
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Because of this, there are only a limited number of companies that facilitate this type of investment, including Sterling Trust, American Estate & Trust, GoldStar Trust and the Entrust Group.
The additionally points out that finding a precious metal dealer to sell coins and/or bullion, or to buy coins and/or bullion from the account is usually the job of the investor. They provide examples of USAGOLD-Centennial Precious Metals and Goldline International as precious metal dealers that may be of interest.
MSN goes on to present their alternative to buying physical stock, and cite ETFs (Exchange Traded Funds) and stocks as an attractive alternative. The article then recounts the worry that IRA tax advisors had a few years prior, which was that they thought by IRAs acquiring such shares, they may be treated, for tax purposes, as purchasing collectibles.
Due to the fact that collectibles are not considered tax redeemable, the concern was that the investor would then use the money to buy the prohibited ETF shares.
This situation was rectified however when, in 2007, the Internal Revenue Service, ruled that shares in precious metal ETFs could be classified as grantor investment trusts, which would thereby avoid any tax issues. Two of the most popular of which are SPDR Shares (GLD +0.10%, news) and the iShares Silver Trust (SLV -0.30%,news).
In their article ‘With a 401(k), it pays to stay the course in crises’ MSN describe the uncertainty that surrounds investments in times of financial crisis.
They state that many rush to sell their stocks, and thereby perpetuate uncertainty in the financial markets.
However they draw on a recent study, which suggests that maintaining the direction that an investor had prior to any crisis, may have significant benefits
They provide the example of the bear market in 2008, they report that many investors withdrew their money from their mutual retirement funds, and consequentially the market took a financial nose dive. In fact the S&P 500 Index ($INX +0.24%) dropped by almost 40%.
Notably however, they say that since this event, the S&P 500 is up more than 150%. MSN then go on to build their argument that consistent investment in 401(k) accounts have been benefited by an average rise of 23.5% between 2007 to 2011.
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MSN conclude their article with input from Timothy Courtney, chief investment officer at Exencial Wealth Advisors in Oklahoma City, quoting him as saying “By accumulating shares and accumulating wealth at lower prices, then when a recovery does come, your wealth begins to compound.”
In this article, Constance Gustke builds upon MSNs argument that this tipe of investment makes for a wise one during times of financial crisis.
However she points out that recently, investors have tended to move away from ETF’s as their gold investment of choice.
She argues that this is due to ETFs not owning it in the physical sense, but instead take the form of trading in the gold index.
She provides the example of the CBOE Gold Index, which tracks the price of mining companies.
Conversely however, Gustke goes on to cover the downsides of investing in coins. She stresses that prices fluctuate significantly, and that they should be held for three years, minimum.
The five tips of which the article focuses on, are as follows:
- Stick with North American coins.
- Compare dealer prices.
- Buy 1-ounce coins.
- Avoid rare coins.
- Uncover dealer buyback policies.