Gold Has a Place in the Right Portfolio

Gold and other precious metals have their appeal as investments, but you need to make sure any bullion or coin purchases make sense for your portfolio before you make any precious metals investments.

Tangible assets have a certain appeal to some investors. In a world of online brokerage accounts and stocks and bonds whose performance can seem almost ethereal and are impacted by breaking news stories, some people prefer to hedge their bets by investing in more physical assets, like gold, silver and other precious metals.

Precious metals can be a smart part of a balanced investment portfolio, but before you make a purchase, be sure you understand what role any potential investment will play in your financial life and that you’re comfortable with the logistics of owning physical gold, silver or other metals.

Before shopping around for the best coin or bar deal, or looking for a gold or retirement account provider, consider what you want to gain from owning precious metals. For some people, owning some bullion is simply an investment diversification strategy. Others want a little retirement nest egg of their own to have physical possession of. Still others want to open an account where they can invest in IRS-approved gold or other precious metals for their retirement.

Each of these precious metals investments can be worthwhile, but they’re not the same thing. Before investing, it’s important to understand the differences between these options, including the fees, access and custodian or storage requirements (including the pros and cons of home storage), insurance needs, IRS or other regulations, authentication and more.

The bottom line? Before you invest, take the time to learn more about your options and be wary of anyone who rushes you into a decision, tries to instill a false sense of scarcity or urgency or doesn’t back up their claims with reliable, third-party information.

When shopping around for a precious metals investment company, don’t settle for glossy websites and slick sales reps. You can also see their review of Goldco and weigh it against the company's own account of its fees and services. Dig deeper to get a sense for what it will be like to do business with the company, not just to place an order, but if you want to sell or get access to your metals down the road.

When comparing one precious metals company to the next, here are a few questions to consider asking:

How much will I pay to invest? Be sure you understand how prices are set and whether you’ll pay additional markups, spreads or dealer’s margins above spot price. Also get a sense for whether or not there are additional shipping, commissions and account fees.

What coins or other precious metals investments do you offer? Are the available investments a good fit for your investment objectives? How do premiums and other fees compare to competitors?

How will I set up my retirement account, if applicable? If you’re interested in opening a retirement account with IRS-approved investments like gold, be sure you understand who does the paperwork to set up your account, who your custodian is, how and where your metals will be stored and any administration fees or other costs you should be aware of.

How will my metals be stored? Will they be pooled or segregated? Required or optional? Are there additional storage fees?

How will I sell my investments, if/when I want to sell? Who handles buybacks? How are they priced? Are there any restrictions that could impact your liquidity?

Is the company known for educating its customers? Reputable precious metals investment companies will educate their customers about the pros and cons of owning gold and other precious metals, not just tout the potential benefits and try to convince you that every other type of investment is foolish.

If you have specific questions about costs, processes and so on, don’t be afraid to ask for specifics. How responsive are customer service reps? Are they pushy or high-pressure? Do you get clear answers to your questions or are things still a little murky?

It’s easy to get wrapped up in the more nebulous reasons to invest in gold and other precious metals, financial security, independence, protection from inflation or market and economic uncertainties, but it’s important to crunch the numbers when determining whether a potential investment is right for you.

Keep in mind that, when you invest in gold, silver or other precious metals, there’s likely to be a difference between what you pay and what you would get if you turned around and sold your investment. This could be impacted by a host of factors, including the type of product you choose, market conditions, dealer’s margins, shipping and account or storage fees.

Not every red flag is obvious. For one, be on guard if your sales representative responds to big-picture questions by ratcheting up the sense of urgency instead of providing you with the information you’re looking for.

Other warning signs include statements like:

• This is the only guaranteed appreciating asset out there.

• There’s been/is going to be a [significant market event], so you need to act right away.

• It’s wise to roll most/all of your retirement assets into [this precious metals investment].

• [This transaction] can’t be reversed. (Unless that’s actually true!)

You may also want to proceed cautiously if you feel pressured to make an investment in unusual/limited-edition coins and other rare collectibles before you’ve had a chance to educate yourself about more widely-held investment options. Sure, the exotic story may be interesting, but unusual collectibles could cost you more and may be harder to sell in the future.

When in doubt, take a step back, you’ll rarely find that waiting a day before making a financial decision has cost you big time.

One of the best ways to keep yourself accountable before making any type of financial decision is to write out your answers to key questions, like:

• What are my goals for making this investment?

• How do I want to take possession?

• How much will the entire process cost me?

• How will I get my money back if I decide to sell?

After making your investment, compare your notes with your contract/paperwork to make sure all of your expectations and agreements line up, then save your account paperwork, order confirmations, fee schedule, resale information and more in an organized, easily-accessible folder/file.